What is CGTMSE and how does a credit guarantee work?
Why a guarantee is not a loan, and what it means for collateral.
Published 22 October 2026
CGTMSE — the Credit Guarantee Fund Trust for Micro and Small Enterprises — was set up by the Ministry of MSME and SIDBI to make it easier for small businesses to borrow without collateral.
A guarantee, not a loan
CGTMSE does not lend money. Instead, it guarantees part of a loan that a bank or other eligible lender gives you. If the borrower defaults, the guarantee covers a share of the lender’s loss.
Because the lender carries less risk, it can lend to eligible micro and small enterprises without asking for collateral or a third-party guarantee.
What this means for you
- You still apply to a lender. The lender assesses your business and decides whether to lend.
- You may not need collateral for loans covered by the guarantee, within the limits CGTMSE sets.
- There is a guarantee fee. It is charged on the covered amount and may be passed on to you. Ask your lender.
- Limits and eligibility change. CGTMSE revises coverage limits, fees and eligible sectors from time to time.
Who is usually eligible
New and existing micro and small enterprises in manufacturing, services and (subject to current rules) retail trade, borrowing from a member lending institution.
Always check the latest rules on the official site: cgtmse.in.