Government loan schemes
CGTMSE Scheme: How Collateral-Free Business Loans Work
Quick answer
CGTMSE is a government-backed trust that guarantees business loans to micro and small enterprises, so banks can lend without collateral or a third-party guarantor. It covers loans up to ₹10 crore and guarantees 75% to 90% of the amount. You don't apply to CGTMSE yourself: you ask a member bank or NBFC for a CGTMSE-backed loan, and the lender pays a yearly fee of 0.37% to 1.20%, often passed on to you.
On this page
- CGTMSE at a glance
- How a CGTMSE guarantee works
- How much of your loan CGTMSE guarantees
- The guarantee fee and who pays it
- Who is eligible for a CGTMSE-backed loan
- Hybrid security: part collateral, part guarantee
- How to get a CGTMSE-backed loan
- What happens if you can't repay
- CGTMSE vs Mudra vs PMEGP
- Frequently asked questions
CGTMSE at a glance
- Full name
- Credit Guarantee Fund Trust for Micro and Small Enterprises
- Set up by
- Ministry of MSME and SIDBI, in 2000
- What it does
- Guarantees loans to lenders. It doesn't lend, give subsidies or use agents.
- Maximum cover
- ₹10 crore per borrower (up from ₹5 crore, from 1 April 2025)
- Guarantee coverage
- 75% to 90% of the loan, by borrower category and size
- Yearly guarantee fee
- 0.37% to 1.20% a year plus GST, by loan size
- Who's covered
- New and existing micro and small enterprises in manufacturing, services and trading
- Loan types
- Term loans and working capital (cash credit, overdraft)
- Lenders
- Member Lending Institutions: banks, regional rural banks, small finance banks and selected NBFCs
- Scale
- ₹3 lakh crore of guarantees approved in FY 2024-25
Scheme details as of October 2026. Sources are listed at the end.
How a CGTMSE guarantee works
Banks ask for collateral so they have something to fall back on if a loan goes bad. CGTMSE replaces that collateral with a promise: if you default, it pays the bank most of the loss.
- Your business Applies for a loan and offers no property as security
- Loan application
- Member bank or NBFC Appraises your business, sanctions the loan and takes the guarantee
- Applies for cover and pays the yearly fee
- CGTMSE Guarantees 75% to 90% of the loan. If you default, it pays that share of the bank's loss.
The guarantee protects the bank, not you. You still owe the whole loan, and the bank still checks your credit record and repayment capacity. CGTMSE just takes "no collateral" away as a reason for rejection.
How much of your loan CGTMSE guarantees
| Borrower | Up to ₹5L | ₹5L–50L | Over ₹50L |
|---|---|---|---|
| Women entrepreneurs, Agniveer-promoted MSEs | 90% | 90% | 90% |
| SC/ST, persons with disability, aspirational districts, ZED-certified | 85% | 85% | 85% |
| Micro enterprises | 85% | 75% | 75% |
| North East, J&K, Ladakh | 80% | 80% | 75% |
| All others | 75% | 75% | 75% |
For guarantees from 1 April 2025, including trading activity. MSEs in RBI-identified credit-deficient districts get an extra 5%.
Higher coverage makes a bank more comfortable lending to you, which is why women-led businesses and special categories often find CGTMSE-backed loans easier to get.
The guarantee fee and who pays it
The lender pays CGTMSE an annual guarantee fee (AGF). Most lenders pass it on to the borrower, so check your sanction letter.
| Loan amount | Fee a year |
|---|---|
| Up to ₹10 lakh | 0.37% |
| ₹10 lakh – ₹50 lakh | 0.55% |
| ₹50 lakh – ₹1 crore | 0.60% |
| ₹1 crore – ₹2 crore | 0.85% |
| ₹2 crore – ₹5 crore | 1.00% |
| ₹5 crore – ₹8 crore | 1.10% |
| ₹8 crore – ₹10 crore | 1.20% |
From 1 April 2025, plus 18% GST. A 10% discount applies to categories such as women-owned, SC/ST, ZED-certified and North East units.
- How it's charged: on the loan amount in the first year, then on the outstanding balance each year.
- Example: on a ₹25 lakh loan, the first-year fee is 0.55%, or ₹13,750 plus ₹2,475 GST: about ₹16,225, falling as you repay.
- Treat it as part of your interest cost. It adds roughly half a percent a year, which still usually beats pledging property you can't otherwise use.
Who is eligible for a CGTMSE-backed loan
Covered
- New and existing micro and small enterprises
- Manufacturing, services, and retail and wholesale trade
- Proprietorships, partnerships, LLPs and companies
- Term loans and working capital, without collateral or a third-party guarantee
Micro or small? From 1 April 2025, a micro enterprise has up to ₹2.5 crore invested in plant and machinery and up to ₹10 crore turnover. A small enterprise has up to ₹25 crore and ₹100 crore. Your Udyam registration shows your category, and lenders will ask for it.
Hybrid security: part collateral, part guarantee
If you have some property but not enough to cover the whole loan, the bank can take it as partial security and get CGTMSE cover on the rest.
Example: a ₹2 crore loan with property worth ₹80 lakh leaves ₹1.2 crore unsecured. At 75% coverage, CGTMSE guarantees ₹90 lakh of it.
- Your property: ₹80 lakh 40%
- CGTMSE guarantee: ₹90 lakh 45%
- The bank's own risk: ₹30 lakh 15%
How to get a CGTMSE-backed loan
-
Get Udyam registration
It's free on the official portal and proves you're a micro or small enterprise. See how to register on Udyam.
-
Choose a member lender
Most banks are CGTMSE members; for an NBFC, ask whether it is registered with CGTMSE.
-
Apply for the business loan and ask for CGTMSE cover
Say clearly that you want the loan without collateral under CGTMSE. Bring your KYC, financials, GST returns, bank statements and, for larger loans, a project report.
-
The bank appraises the loan
It decides on your creditworthiness and repayment capacity as usual. CGTMSE doesn't replace this check.
-
The bank applies for the guarantee and pays the fee
This happens on the CGTMSE portal. The guarantee starts when the fee is paid.
-
Sign the sanction letter and check the fee
Confirm the guarantee fee, GST and whether they're charged to you each year.
What happens if you can't repay
- The bank first tries to recover the dues from you, and the default goes on your credit report.
- After a lock-in period (generally 18 months from the guarantee or the last disbursement), the bank can claim from CGTMSE, which pays its share of the loss.
- You aren't let off. The bank keeps recovering from you after the claim and passes recoveries back to CGTMSE.
If repayments are getting hard, talk to the bank early about restructuring rather than missing EMIs.
CGTMSE vs Mudra vs PMEGP
| CGTMSE | Mudra | PMEGP | |
|---|---|---|---|
| What it is | Guarantee on your loan | Loan scheme | Loan + subsidy |
| Maximum | ₹10 crore | ₹20 lakh | ₹50 lakh / ₹20 lakh project |
| Collateral | None needed | None (guaranteed by CGFMU) | None up to ₹10 lakh; larger loans often under CGTMSE |
| Best for | Larger loans, growing MSEs | Small and first loans | New units wanting a subsidy |
They often work together: a PMEGP loan above ₹10 lakh is commonly covered by CGTMSE. See every scheme on our government schemes page.
Check if you can get a collateral-free loan
Tell us about your business and a Kredway loan advisor calls you back to talk through CGTMSE cover, the fee and which lender to approach. We advise; we don't lend.
Frequently asked questions
Can I apply to CGTMSE directly?
No. CGTMSE works only with member lenders. You apply for a business loan at a bank or registered NBFC and ask for CGTMSE cover; the lender applies for the guarantee.
What is the maximum CGTMSE loan amount?
₹10 crore per borrower, for guarantees from 1 April 2025. It was ₹5 crore before that.
Is a CGTMSE loan free of cost?
No. You pay interest as usual, and the annual guarantee fee of 0.37% to 1.20% plus GST is usually passed on to you.
Can a new business get a CGTMSE-backed loan?
Yes. New and existing micro and small enterprises are both eligible, though a new business needs a strong project report since it has no track record.
Are traders and shopkeepers covered?
Yes. Retail and wholesale trade are covered, along with manufacturing and services.
Does the bank still check my CIBIL score?
Yes. CGTMSE removes the need for collateral, not the credit check. A poor record can still lead to rejection.
Can a bank refuse even with CGTMSE?
Yes. The lending decision is the bank's. CGTMSE cover is available to it, not guaranteed to you.
CGTMSE loan kya hai?
CGTMSE ek sarkari trust hai jo micro aur small businesses ke loan par bank ko guarantee deta hai, taaki bank bina collateral ke ₹10 crore tak ka loan de sake. Default hone par CGTMSE bank ko 75% se 90% tak nuksaan bharta hai, lekin loan chukana aapki zimmedari rehti hai.
CGTMSE loan kaise milega?
Udyam registration karwayein, phir kisi member bank ya NBFC mein business loan ke liye apply karein aur CGTMSE cover maangein. Bank aapki file jaanchta hai aur khud CGTMSE se guarantee leta hai. Guarantee fee aksar aapse li jaati hai.