Collateral free credit scheme for MSEs | Fusion - WeRIndia

If you are running a business, then you might be aware of how difficult it is to get a credit and especially without collateral.

Micro firms often find it difficult to get a loan with a reasonable rate of interest. But, with this credit scheme of Government of India, it is not as difficult as you think to get the loan for your micro or small business enterprise.

A Trust named Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) was established by the Ministry of Micro, Small and Medium Enterprises, Government of India and Small Industries Development Bank of India (SIDBI) was established for micro and small business enterprises.

It was launched in 2000. Funds to this scheme were contributed in the ratio of 4:1 by the government and SIDBI.

There were 133 eligible lending Institutions to support the business enterprises till the end of May, 2016. These include both public and private sector banks. Some regional rural banks and foreign banks were also part of these institutions.

The eligible business enterprises can avail term loans and working capital of up to ₹100 lakhs without any collateral or security or even third party guarantee. Both the existing as well as new enterprises can avail the credit facility.

Rehabilitation assistance extended by the lender would be covered for those units that may become sick due to lack of proper control of management. These are covered under the guarantee scheme.

The guarantee cover varies with the loan amount which does not exceed 85 per cent of the sanctioned amount of the credit facility.

The guarantee cover for working capital is of 5 years. Fee for the guarantee also varies. It is 1 per cent per annum of the credit facility sanctioned. Yet, it is 0.75 percent for the credit facility of up to ₹5 lakh and 0.85 percent if it is above ₹5 lakh and below the amount of ₹100 lakh for women, and Micro Enterprises and business units in the north east regions including Sikkim.

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