Collateral Free Loans

What are the features of the CGTMSE collateral free loan?

• The loans are available for an amount up to Rs 2 crore (Rs 1 crore for retail trade) as per the terms of the MSMED, act of 2006.
• There may be loans for a higher amount as well. However, any amount more than Rs 1 crore will require the support of collateral. This collateral can be in the form of Plant & Machinery, Land or any other business property owned by the proprietor.
• Both, New and existing MSEs can avail the loans
• These loans are available for working capital and term Loans
• The Guarantee Cover requirement as per the categories of the loan is 75%, 80%, and 85%, respectively.
• The entities excluded from the loan coverage are educational/training institutions, retail trade, and SHGs.
• Manufacturing, as well as the Service sectors are covered.

What are the benefits of collateral free loan?

The biggest benefit of a collateral-free loan is the fact that there is no requirement of collateral. Some of the other benefits are:

• The loans are given at subsidized interest rates
• The repayment is flexible with tenure up to 5 years
• Letter of Credit and bill discounting is available up to 180 days.
• There is no check of credit history while sanctioning this loan
• The funding is also available for product development
• The application processing is hassle-free and very quick

What are the eligibility criteria for availing collateral free loans?

The eligibility criteria are very straightforward for availing these loans:

• The private limited companies with SME/SSI registration are eligible to apply
• Sole Proprietorship Firms, Private limited Companies, Partnership Firms, Public Limited Companies

How to apply for the collateral free loan under the CGTMSE?

• You need to start your business operations, get all the licenses in place and register your business. You also need to open a current account at a bank and obtain a business PAN card.
• You need to prepare a Detailed Project Report which indicates the viability of the project along with quantifiable metrics like ROI, Payback, and break-even. You must involve professional help in preparing the feasibility report so as to convince the lenders about the prospects of the business
• You need to approach the bank in person and apply for the loan. It is advisable to approach 2-3 banks so as to have wider options for loan sanctions.
• Once the loan is sanctioned, the bank will apply for the subsidy coverage to the CGTMSE. The bank needs to submit various documents to get the approval of the scheme. Once the CGTMSE agrees to provide you coverage, you will need to pay the CGTMSE guarantee fee as applicable.

All the public sector banks such as SBI, Allahabad Bank, UCO Bank, Bank of Baroda, Bank of India, Corporation Bank, Dena Bank, IDBI Bank, and Indian Overseas Bank offer the collateral-free CGTMSE loans.

The private sector banks offering these loans are ICICI Bank, Axis Bank, HDFC Bank, IndusInd Bank, Kotak Mahindra Bank, ING Vysya Bank etc.

Frequently asked questions: Collateral Free Loans