Start-ups can look out for bank finance under CGTMSE credit guarantee scheme. The new entrepreneurs can set up their Micro or Small Enterprises units without the hassles of collateral security and / or third party guarantee if they are eligible for CGTMSE credit guarantee scheme. The scheme is advantageous for both the borrowers and lenders. The borrowers neither have to struggle for bringing collateral security nor get into saddle for offering third party guarantee to the lenders. The lenders (Banks and financial institutions) are comfortable with CGTMSE credit guarantee scheme as they can claim certain percentage of amount in default from the trust under guarantee cover when the borrower is unable to repay the dues from cash generated from the operation or by disposal of prime security. In terms of existing scheme, CGTMSE offers credit guarantee to banks and financial institutions for extending credit facilities up to Rs.100 lakh per eligible borrower. Thus, the banks and financial institutions can extend fund or non-fund credit facilities to Micro and Small Enterprises (MSEs) without the fear of complete default of money financed by them.
The key condition for availability of guarantee to banks and financial institutions from CGTMSE is that facilities extended by them should be without obtaining collateral security and / or third party guarantee. The guarantee limits varying from 70% to 85% for fund or non-fund credit facilities to Micro and Small Enterprises (MSEs). The loan granted to borrowers of micro enterprises borrowing less than Rs.5lakhs are eligible for guarantee of 85% of loan amount(subject to maximum of Rs.4.25 lakh).Women borrowers and borrowers of north eastern region including Sikkim are eligible for guarantee of 80% on loan amount. In certain cases where credit extended to MSEs is more than Rs.100 lakh without collateral security and third party guarantee, those credits are also eligible for credit guarantee varying from 70% to 80% subject to maximum ceiling of Rs.62.50 lakhs or 65 lakhs as the case may be.
Guarantee fee/service fee: At present, guarantee fee is payable @1.5% (0.75% in case of North Eastern Region including state of Sikkim) on the credit facility agreed to be covered by the Trust.