What is CGTMSE? Everything MSMEs need to know about collateral-free loans

The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) is a lifeline for entrepreneurs who wish to grow without worrying about collateral.

With enhanced credit limits, reduced guarantee fees, and special benefits for women, transgender, and informal micro enterprises (IMEs), CGTMSE is enabling thousands of small businesses to access easier, more affordable credit.

And if you are looking for fast, collateral-free business loans, IDFC FIRST Bank has excellent offerings that complement these schemes for Micro, Small, and Medium Enterprises (MSMEs).

What is CGTMSE?
 

CGTMSE is a government-backed scheme, which is jointly set up by the Ministry of MSME and Small Industries Development Bank of India (SIDBI) in the year 2000. The purpose is to encourage lenders to offer collateral-free loans to Micro and Small Enterprises (MSEs).

Rather than demanding security or third-party guarantees, banks and financial institutions (known as Member Lending Institutions or MLIs) are backed by a credit guarantee from CGTMSE.

CGTMSE loan – How it works
 

Under the CGTMSE scheme, when an MSE defaults on a loan, CGTMSE covers a significant portion of the lender's loss—making banks more confident in lending to smaller businesses. This boosts access to formal credit for new and existing enterprises that lack assets or property to pledge.From 1st April 2025 onwards, CGTMSE now offers credit guarantees of up to ₹10 crore, which is up from the earlier limit of ₹5 crore. This massive step-up benefits not just manufacturers and traders but even service providers across distinct sectors.

CGTMSE scheme eligibility
 

New and existing MSEs engaged in manufacturing or service activities qualify under the CGTMSE scheme. But enterprises involved in agriculture, Self Help Groups (SHGs) and Joint Liability Groups (JLGs) are excluded from coverage.

CGTMSE loan interest rate & fees
 

The interest rate on a CGTMSE-covered loan is decided by the lender (not CGTMSE), and it typically aligns with standard MSME loan interest rate norms.

Special discount
 

Transgender-run MSEs enjoy 10% concession on these fees and receive 85% guarantee coverage.

Women-led businesses now receive 90% guarantee coverage, helping them get loans on even better terms.

This makes the CGTMSE scheme especially suitable for micro traders, artisans, and rural entrepreneurs who often find formal loans hard to come by.

Looking for a quick and hassle-free business loan?
 

If you are an entrepreneur looking out for quick and direct funding at favourable terms, IDFC FIRST Bank’s business loan for MSMEs can give your enterprise the momentum it needs:

• Collateral-free loans of up to ₹1 crore
• Loans up to ₹50 lakh approved easily based on banking or GST returns
• Flexible repayment options i.e., option to choose between a term loan or dropline overdraft facility
• Quick disbursal through a fully digital and hassle-free process
• Smart planning with the business loan EMI calculator to estimate monthly outflow

Ending note
 

The CGTMSE scheme is a powerful tool that bridges the trust gap between small businesses and lenders, especially for those who lack assets or formal credit history. With expanded loan limits, reduced fees, and special inclusivity benefits for women, transgender, and informal businesses, it is a much-needed boost to the entrepreneurial vertical of India.

So, why wait? Explore MSME loans with IDFC FIRST Bank today and give your business the much-needed boost it deserves.