Frequently Asked Questions on MSME Loans

FAQs on MSME

The micro, small and medium enterprises (MSME) sector is one of the largest providers of employment and industrial output in the country. As much as 45% of industrial production and 40% of India’s exports come from the MSME sector. Hence, the need for business finance is also higher in this sector.

What is MSME?

The Government of India understands the value of the contribution of the MSME sector. There is a dedicated ministry working on this segment. As per the Ministry of MSME – Micro Enterprises are the ones where the investment in plant and machinery is not more than Rs. 25 lacs. Small Enterprises are the ones where the investment in plant and machinery is more than Rs. 25 lacs and less than Rs. 5 crores. Medium enterprises are the ones where the investment in plant and machinery is more than Rs. 5 crores but exceeds Rs. 10 crores.

Who is eligible for MSME Loan?

There is a standard definition given by the government of India.

1. A stabilized business that has been in operations for more than 6 months.

2. A minimum turnover of ₹ 90,000 or more in the 3 months heralding your loan application.

3. The business should not fall under the blacklisted/ejected list for SBA finance.

4. The physical location of your business should not be on the negative location list.

5. Trusts, NGOs, and charitable organizations are not acceptable for small business loans.

If you are not aware that your business falls under a restricted category or location, you can contact us to confirm your eligibility.

How can I get a loan for MSME? OR How to apply for an MSME loan?

If you are looking ahead to avail and make the most out of this ambitious initiative by the management, you must consider Terkar Capital for availing the MSME Loan Scheme, it is a trustworthy lending institution, and even if you are uncertain about the scheme; the executives in Terkar Capital will explain you the complete procedure, client privacy and requirements are prioritized here and it has been helping such small and micro enterprises to flourish over the years.

What are the products under MSME Loan?

Identifying that business loans can be used for setting up a new enterprise or climbing up (expansion, diversification, modernization, technology up-gradation). These can be for the following:

• Acquisition of Plant and Machinery including lab equipment, testing equipment, furniture, electric fittings, etc

• Meeting working capital requirements would be as raw materials, stock-in-progress, finished goods, etc

• Trade Finance (Bill discounting) — for paying the creditors while anticipating payment from debtors

• Launch of new product variety, expansion of business, warehousing need, credit for marketing and advertising purpose

• Additional monetary compensation for any eligible purpose.

What is the interest rate for MSME?

The rate of interest for MSME is always cheaper compared to the loans. However, still, the rate of interest varies and depends upon the end use of the funds and the life of the business.

How Terkar Capital Helps in getting MSME Loan Funding?

Terkar Capital is one of the well-established MSME loan providers in Pune. and working across India. With a highly skilled and dedicated team at Terkar Capital, we ensure that we fulfill our client’s needs and requirements. We provide multiple solutions to our clients with the best interest rate options. However, the relationship doesn’t end with the sanctioning of the loan. We maintain a lifetime relationship with the customer to be of help whenever required.

CGTMSE scheme FAQs

 

FAQs on CGTMSE

The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) is a trust inaugurated by the Ministry of Micro, Small and Medium Enterprises, the Government of India, and the Small Industries Development Bank of India (SIDBI). Launched on 30 August 2000, the main purpose of the CGTMSE scheme is to provide credit guarantees to financial institutions that grant loans to SMEs and Memes.

What is CGTMSE Meaning?

The basic purpose of CGTMSE is to encourage first-time entrepreneurs to build SMEs and MEME, estimated to support the Indian economy by availing of collateral-free loans from qualified financial institutions. The guarantee includes default by the borrower to repay the advance. Thus, the CGTMSE scheme essentially considers the requirement of loans to first-generation administrators so that they can flourish in a competitive environment without the burden of security or third-party guarantees. In turn, the financial institutions are given cover for the lack of security to fund SMEs and Memes promoted by small Indian businessmen up to a certain limit.

CGTMSE – A Driving Force for MSMEs

What are CGTMSE Fees?

The fees charged by the trust fund are 1% p.a of the amount so approved:

1. 0.75% – for loans of up to Rs. 5 Lac

2. 0.85% for loans above Rs. 5 Lac but up to Rs. 100 Lac.

The credit guarantee available below this scheme is 75/80% of the amount so transmitted to a maximum cap of Rs. 62.5 Lac / 65 Lac for a loan facility of up to Rs. 50 Lac. The percentage guarantee implies 85% for micro-enterprises for a sum of up to Rs. 5 Lac. The percentage of guarantee is 50% of the amount so approved for a credit of above Rs. 50 Lac with a maximum limit of Rs. 100 Lac. The ownership of the guarantee is a block of 5 years.

Does CGTMSE cover retail trade?

CGTMSE Coverage extended to Retail Trade & Collateral Loans too – Now Retail Trades & partial collateral loans may be included under the Credit Guarantee Scheme of CGTMSE. A decision in this opinion was taken under “Rebooting CGTMSE” established by the Ministry of MSME and CGTMSE on February 20, 2018.

 Following modifications were suggested for implementation:

1. Charging Annual Guarantee Fees (AGF) on Outstanding Loan Amount somewhat than the sanctioned amount.

2. Extending the Coverage of the Credit Guarantee Scheme (CGS) to cover the MSE Retail Traders section.

3. Providing loans with Partial Collateral Security “Hybrid Security” under Credit Guarantee Scheme.  

4. Increase in the extent of guarantee coverage to 75% from the existing 50% for proposals above ₹50 Lac.

5. Intensifying the IT infrastructure of the Trust to develop operational efficiencies and reduce the turnaround time for claim settlement.  

6. Augmentation of the corpus of the Trust from Rs. 2,500 crore to Rs. 7,500 crore

7. To increase coverage of the loans covered under the credit guarantee scheme from Rs. 1 crore to Rs. 2 crore

8. To increase coverage of the credit guarantee scheme for loans being enlarged to micro and small enterprises by NBFCs also.

Understand CGTMSE scheme execution.

What is CGTMSE Loan Interest Rate?

All lenders impose a particular cost on the borrower. The important part of the cost to the borrower is the interest rate for the loan. The majority of the lenders recover the CGTMSE loan interest rate that does not exceed 14% PA including the guarantee cover. Most of the time the rate of interest varies as per change in the financial institutions and the facility which is available under CGTMSE.

What is CGTMSE Full form?

The full form of CGTMSE is Credit Guarantee Fund Trust for Micro and Small Enterprises which gives funding to financial institutions to help SMEs and MSMEs.

How to apply for the CGTMSE Scheme?

To apply for a CGTMSE loan, you are required to set up a business plan including business model, projected goal, etc., and obtain certain business documents if you have just registered your business. Once you have all the essential documents and business plans prepared by a professional, you can apply for the loan with eligible moneylenders. They will analyze your business model and application. If the bank is satisfied, it will process the request to CGTMSE for getting a guarantee cover and confirm the loan amount after CGTMSE approves your application and you pay CGTMSE loan fees.

It reaches out even to the rural areas. The application can be made particularly if the applicant is eligible for a loan under the CGTMSE scheme.

How does Terkar Capital help in getting CGTMSE Exposure?

For many years Terkar Capital has worked extensively and exclusively for raising the finances for the businesses. With respect to the company and its financials, we arrange the source of the funding for the company. And CGTMSE loan is among them. There are many financial facts, and figures that need to be considered before one shall proceed on the CGTMSE. We analyze the financials, and business and arrange the whole execution with the best suits facility under CGTMSE.

CGTMSE – A Driving Force for MSMEs

Loan under CGTMSE scheme

CGTMSE scheme

All the emerging businesses in India, be it micro, small, or medium are in constant need of finances. Such a need can arise due to several reasons such as expansion, purchase of heavy machinery, payment to creditors, working capital issues, or paying off business dues. But many times due to less knowledge of finance they do not receive proper guidance on the cause. Hence, Terkar Capital comes into the picture for providing consulting on raising finances. We have a variety of products available in secured as well as unsecured funding based on the requirement of the borrower. CGTMSE can be the best option for Small and Mid-size enterprises to raise finance which acts as a major source of funds for them

Features of the scheme

1. The initiative was launched to help small businesses grow in a competitive market and assist entrepreneurs to build their businesses and avail of collateral-free loans easily and conveniently.
2. The scheme also aims at strengthening the credit lending facility to developing industries and helping them raise funds for the same.
3. Being a collateral-free loan, the process is quite quick and convenient.
4. It has the facility of guarantee cover for their lenders which will cover their loss in case of default by the borrower. The guarantee cover will exist until the total tenure of the loan credit.
5. The guarantee coverage of the scheme ranges from 70 to 85% in case of non-payment by the borrower.  
6. CGTMSE has a guarantee cover of 50%/75%/80%/85% as per the diverse eligibility criteria.
7. The maximum number of funds availed in this scheme is Rs. 200 Lacs.
8. CGTMSE

provides good guarantee covers to North East Region Women Entrepreneurs as well and encourages them to expand their businesses.

The rate of interest may differ as per the market conditions

Procedure for CGTMSE scheme

1. Prepare a project report/ business plan

The crucial step is preparing the project report or a business plan. It has to be submitted to the lending company. Here the lending company will scrutinize whether the company is eligible under the scheme or not.

2. Scrutiny of documents

The lending institution or company will do a thorough investigation of the required documents and proceed with loans.

3. Sanction the loan

The lender will sanction your loan after duly verifying your documents

4. Obtain CGTMSE cover

Once the loan is sanctioned by the bank, the bank will apply to the CGTMSE organization and obtain CGTMSE scheme cover for the loan sanctioned. After obtaining the loan, the customer will have to pay services charges or fees as per the requirement.

Eligibility for CGTMSE (Borrower)

1. The applicant must be categorized as micro and small enterprises.
2. CGTMSE cover is available for Loans to Micro and Small Enterprises (MSE) engaged in manufacturing or service activities.
3. CGTMSE cover is not available for loans to enterprises engaged in retail trade, educational institutions, training centers, self-help groups, and agriculture.
4. The business must have at least 3 years of continuity

Eligible Lending Institution:

CGTMSE has designated Member Lending Institutions (MLI) which can provide loans to MSMEsIn this list, there are Government Banks, Scheduled Commercial Banks, Regional Rural Banks, NBFCs, Financial Institutions, etc. who have signed an agreement with the CGTMSE ministry.

Why Terkar Capital?

If you are looking for a reliable consultant for raising finance, Terkar Capital can best suit you. It is one of the most modernized and highly specialized finance facilitators in Pune, Mumbai, and India. We understand the borrower's needs, strengths, and weaknesses and work hard to provide professional services. Our timely and professional services make us different from others. Apply for a CGTMSE loan with Terkar Capital.