CGTMSE — Collateral-Free Loans up to ₹10 Crore for Micro and Small Enterprises
The MSME guarantee, and why a startup would use it
CGTMSE was set up in 2000 by the Ministry of MSME and SIDBI to guarantee bank loans to micro and small enterprises that cannot offer collateral. It is older, larger and more widely understood by branch staff than CGSS. From 1 April 2025 the guarantee ceiling doubled to ₹10 crore per borrower, and trading activity is covered.
For a startup the relevance is simple: if the company is not DPIIT-recognised, CGSS is unavailable and CGTMSE is the route. It is also used where a startup already has a CGSS-backed facility and needs a second, separately guaranteed line — the two schemes cannot cover the same loan, but they can cover different loans.
Cover and cost
| Item | Position |
|---|---|
| Ceiling | ₹10 crore of guarantee cover per borrower, across all facilities |
| Extent of cover | 75% standard; 85% for micro enterprises on small loans, women-owned units and units in the North-East, per the current fee circular |
| Annual guarantee fee | Starts at 0.37% per annum on the outstanding, rising by slab; concessions for women, SC/ST, ZED-certified and North-East units |
| Facilities | Term loans and working capital, fund- and non-fund-based, including hybrid security where partial collateral is offered |
Trust and lenders
The Trust issues the guarantee; the member lending institution — a scheduled bank, an eligible NBFC, a small finance bank or a financial institution — takes the credit decision and lodges the cover. Banks have internal thresholds above which CGTMSE cover is mandatory for collateral-free MSE loans, which is why a well-prepared MSME file often gets it without being asked.
Who qualifies
- •Micro or small enterprise under the MSMED Act, evidenced by Udyam registration
- •Manufacturing, services or trading activity
- •New or existing unit; the loan must be for eligible business purposes
- •Not an NPA with any lender; no wilful default history
- •DPIIT recognition is not required
What the lender's MSME cell will ask for
- •Udyam Registration Certificate; PAN, GSTIN, Certificate of Incorporation or partnership deed
- •KYC of proprietor, partners or directors; CIBIL consent
- •Project report or business plan with cost of project and means of finance
- •CMA data and projections for the facility tenure
- •Audited financials for the last two or three years, or provisional accounts for a new unit
- •Bank statements for twelve months; existing loan statements
- •Quotations for machinery or assets to be financed; lease deed or ownership proof for premises
- •Licences and registrations specific to the activity (FSSAI, pollution consent, shop establishment)
Questions founders ask about CGTMSE
CGSS first: higher ceiling (₹20 crore) and cover designed for startups. CGTMSE is the alternative when the company is not recognised, or for a second facility.
The borrower, through the bank, every year on the outstanding amount. It is small relative to interest but should be in the cost sheet.
Yes. Trading was brought fully within CGTMSE and the ₹10 crore ceiling applies regardless of activity.
No. The guarantee reduces the bank's loss on default; it does not remove the bank's judgement on whether the business can repay. The project report and cash-flow projections still carry the decision.