In order to boost enterprenuership and support Micro, Small and Medium Enterprise in setting up of new business ventures or expansion of their existing business, Govt. of India is operating various funding schemes for the enterprenuers.

Today, in this article we will discuss about one such specialised scheme called “CGTMSE Collateral Free Finance” offered by Govt. of India to MSME Enterprenuers, which offers Collateral Free Funding upto Rs.2 Crores

Who can avail finance under CGTMSE Scheme ?

All business registered as MSME, having Udyam Registration with Turnover upto Rs.250 Crore or Investment in Plant and Machinery upto Rs.50 Crore. The MSME can be from Manufacturing as well Service Industry eligible to apply for finance under CGTMSE Scheme.

What is the purpose of Finance under CGTMSE Scheme

– Purchase of New Machinery or Equipments

– Establishment of New Factory or Land and Building

– Working Capital

– New Setups “Greenfield Project” from experienced promoters in the line of business

– Expansion of existing units by extension, diversification of capacity, product line, markets are considered

Quantum of Finance

– 75% of Cost of project/assets in case of Term Loan

– Working Capital finance as per eligibility

Subject to max. overall limit upto Rs.2 Crore of combine facilities.

Documents to be submitted to Banker :

– Quotations for Machinery to be purchased

– Financial Projections/CMA data of the business

– Details of Work Order in Hand

– Business details vis. Top Suppliers, Top Customers, Inventory, Woking Capital assessments, Company profile, Promoter profile, Business justification.

– KYC of Company i.e. PAN, Aadhar of Promoters, GST Certificate,Licenses Copy, Gumasta, Udyam Certificate etc.

– Project Report / Techno Feasibility Report for Term Loans

– Historical financials / ITR for promoters (for new setups) and company (in case of existing unit)

Key Features of the Funding under the scheme

– Term Loan for purchase of Assets (Machinery, Land & Building) for long tenure

– Moratrium offered generally upto six months for repayment of EMI

– Sub-vention upto 2% p.a. in Interest on MSME Finance

– Attractive Rate of interest ranging from 7.5% onwards depend on profile of the unit and ratings

– No Collateral Security required, as the credit will be guaranteed by CGTMSE

– Primary Security of Asset purchased from Bank Finance and Current Asset of company will be hypothecated to Lender

– Capital Subsidy (Central and State Govt.) is also available for the eligible Machineries purchased under the scheme.

– Annual Guarantee Fee payable to CGTMSE as % on sanctioned limits

– Insurance for Stocks and Asssets purchased from Bank finance to be obtained by borrower

– Enterprenuer operating from Owned or Rented Premises, both are eligible.

Whom to approach for Loans under CGTMSE

– Borrower can approach all large Public Sector Banks (PSU) who are the nodal authority to process MSME Loans under CGTMSE Coverage.

– Complete proposal with project report and documentation expalined above to be submitted to Lender Banks for assessment and processing of proposal.


Disclaimer: The views expressed are strictly of the author. The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.


Author Bio

Qualification: CA in Practice
Company: Bhushan Khot & Co
Location: Mumbai, Maharashtra, India
Member Since: 17 Jun 2020 | Total Posts: 1
Amit is a qualified Chartered Accountant and Ex-Banker with professional experience of over 15 years in varied areas of Banking, Fund raising, Startup Advisory, Audits and Assurance to name a few. He has helped various clients across sector with complex areas in MSME Debt Syndication, Startup Adviso View Full Profile

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One Comment

  1. reet says:

    Very informative article. There are many people who are looking for a business loan or MSME loan. This article will surely help them evaluate the options they have with respect to collateral free loans offered by the Government. Apart from Govt schemes, there are a lot of other Fintech companies like LendingKart too that offer collateral-free loans easily these days.

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June 2021