Many small businesses have a good trade but no property to pledge. The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) exists to bridge exactly that gap: it guarantees a part of the loan to the lender, so the lender can lend without collateral or a third-party guarantee.
How the guarantee works
- You apply for a business loan with a member lending institution — most banks and many NBFCs and small finance banks are members.
- The lender assesses your business as usual and, if it sanctions the loan, covers it under CGTMSE.
- If the loan later turns bad, CGTMSE pays the lender a share of the loss, as per the scheme rules.
- You remain fully liable to repay — the guarantee protects the lender, not the borrower.
Key features
- Who: new and existing micro and small enterprises in manufacturing and services, including retail trade, as per the scheme's rules.
- What: term loans and working capital, without collateral or third-party guarantee.
- Limit: from 1 April 2025 the ceiling for guarantee cover was raised from ₹5 crore to ₹10 crore per eligible borrower.
- Cover: a percentage of the amount in default — higher for micro enterprises, women entrepreneurs and some other categories.
- Fee: an annual guarantee fee, as a percentage of the loan, rising with the loan size; the lender may pass it on to the borrower. Check what you will be charged in the Key Fact Statement.
Exact cover percentages and fees change from time to time — the official CGTMSE website and your lender have the current figures.
How to use CGTMSE
- Ask your lender whether it is a CGTMSE member and whether your loan can be covered.
- Get your Udyam registration — it shows you are an MSE.
- Keep the basics strong: GST filings, ITR, a clean business bank account and a healthy promoter credit score.
A guarantee does not replace credit assessment: the lender still needs to see that the business can repay. Read business loan eligibility and our MSME loan guide.
This guide is general information, not financial advice. Interest rates, fees, eligibility and other terms are set by each lender and can change; the figures in examples are illustrative only. Oxon Fintech is a loan facilitation platform, not a lender — loans are sanctioned and disbursed by our lending partners.