CGTMSE in 2026: How to Get a Collateral-Free MSME Loan up to ₹10 Crore
CGTMSE guarantees your bank loan so no property has to be pledged. Who is covered, what the guarantee fee costs, how much of the loan is guaranteed, and how to ask your bank for it.
In this article
For most small businesses the barrier to a bank loan is not the interest rate — it is the security. Banks want property. CGTMSE exists to remove that barrier: it guarantees the loan to the bank, so the bank can lend against the business itself.
What CGTMSE is
The Credit Guarantee Fund Trust for Micro and Small Enterprises was set up by the Ministry of MSME and SIDBI. It does not lend. It guarantees loans made by member lending institutions — scheduled banks, some NBFCs and small finance banks — to micro and small enterprises, as long as the loan is made without collateral security or a third-party guarantee.
If the borrower defaults, the Trust pays the lender a large share of the loss (the exact percentage depends on the borrower category and loan size). That promise is what lets the bank say yes without a mortgage.
The 2026 numbers
- Cover on loans up to ₹10 crore per borrower, for guarantees approved on or after 1 April 2025 (the ceiling was ₹5 crore before).
- Annual guarantee fee on the outstanding amount, on a sliding scale: from about 0.37% a year for loans up to ₹10 lakh, rising to 1.20% for loans between ₹8 crore and ₹10 crore. Concessions apply for women-owned units, units in the North East, and some other categories.
- Both term loans and working capital can be covered.
Who is eligible
- New and existing micro and small enterprises (not medium), in manufacturing, services and — since the scheme's coverage was widened — retail and wholesale trade.
- Borrowing from a member lending institution.
- The loan must be collateral-free; a lender cannot take a mortgage and a guarantee on the same facility.
How to get it — practically
There is no application form for you to fill. The process runs through the bank:
- Ask before the sanction. Tell the bank at the appraisal stage that you want the loan covered under CGTMSE instead of offering collateral. Banks have targets for guaranteed lending; many will agree if the project is sound.
- Give the bank a bankable project. With no collateral, the bank leans on cash flow: a proper project report with realistic projections and a DSCR the bank is comfortable with matters more than usual. Our DPR Builder sets one up in bank format.
- The bank registers the guarantee on the CGTMSE portal after sanction and pays the fee, usually recovering it from you.
- Keep the account regular. A guaranteed loan that turns NPA is claimed from the Trust by the bank, but the Trust and the bank still pursue recovery from you. The guarantee protects the bank, not the borrower.
Working with State schemes
Several State policies pay the guarantee fee back. Under Punjab's Industrial and Business Development Policy 2026, the CGTMSE fee is reimbursed in full, up to ₹3 lakh a year for seven years. Haryana's 2026 policy plans a separate State-backed sectoral credit guarantee fund. Stack these with the guarantee itself and the effective cost of a collateral-free loan falls close to that of a secured one.
Common misunderstandings
- "CGTMSE means the loan is interest-free." No — it changes the security, not the rate.
- "I need to apply to CGTMSE." No — the bank does it.
- "Medium enterprises qualify." No — micro and small only.
Check your scheme matches or talk to our project finance team about structuring a collateral-free loan.
Frequently asked questions
Does CGTMSE lend money?
No. CGTMSE guarantees loans that banks and other member lending institutions make. You still borrow from the bank; the Trust promises to pay the bank a large part of the loss if you default, which is why the bank can drop the collateral requirement.
Who pays the guarantee fee?
The lender pays it to CGTMSE and, in most cases, recovers it from the borrower. It is charged every year on the outstanding amount. Some State policies reimburse it — Punjab's 2026 policy, for example, repays 100% of it up to ₹3 lakh a year for seven years.
Can a trader get CGTMSE cover?
Yes. Retail and wholesale trade were brought within the scheme's coverage, alongside manufacturing and service enterprises.
Sources
This article is general information for Indian MSMEs, not advice on your specific case. Scheme terms, tax rates and due dates change; the sources above were checked when the article was written or last updated. Speak to a professional before acting on it.
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