{"id":8876,"date":"2026-07-03T20:32:55","date_gmt":"2026-07-03T15:02:55","guid":{"rendered":"https:\/\/www.entrepreneurindia.co\/blogs\/?p=8876"},"modified":"2026-07-03T20:22:22","modified_gmt":"2026-07-03T14:52:22","slug":"collateral-free-loan","status":"publish","type":"post","link":"https:\/\/www.entrepreneurindia.co\/blogs\/collateral-free-loan\/","title":{"rendered":"Low-Investment Manufacturing Units Eligible for 100% Collateral-Free Loans"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.entrepreneurindia.co\/blogs\/collateral-free-loan\/#Collateral_Free_Loans_for_Manufacturing_Units_Under_CGTMSE\" >Collateral Free Loans for Manufacturing Units Under CGTMSE<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.entrepreneurindia.co\/blogs\/collateral-free-loan\/#Related_Article_Collateral-Free_Business_Loan_up_to_%E2%82%B910_Crore_in_India_Complete_CGTMSE_Guide_for_MSMEs\" >Related Article: Collateral-Free Business Loan up to \u20b910 Crore in India: Complete CGTMSE Guide for MSMEs<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.entrepreneurindia.co\/blogs\/collateral-free-loan\/#What_%E2%80%9CCollateral-Free%E2%80%9D_Actually_Means_Under_CGTMSE\" >What \u201cCollateral-Free\u201d Actually Means Under CGTMSE<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.entrepreneurindia.co\/blogs\/collateral-free-loan\/#Why_Low-Investment_Manufacturing_Units_Fit_This_Mechanism_Well\" >Why Low-Investment Manufacturing Units Fit This Mechanism Well<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.entrepreneurindia.co\/blogs\/collateral-free-loan\/#Manufacturing_Categories_That_Work_Well_Under_This_Structure\" >Manufacturing Categories That Work Well Under This Structure<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.entrepreneurindia.co\/blogs\/collateral-free-loan\/#Get_Detailed_Project_Report_DPR_Project_Reports_Profiles\" >Get Detailed Project Report (DPR): Project Reports &amp; Profiles<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.entrepreneurindia.co\/blogs\/collateral-free-loan\/#The_Guarantee_Fee_%E2%80%94_What_It_Costs_to_Use_CGTMSE_Coverage\" >The Guarantee Fee \u2014 What It Costs to Use CGTMSE Coverage<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.entrepreneurindia.co\/blogs\/collateral-free-loan\/#Who_Actually_Applies_for_the_CGTMSE_Guarantee\" >Who Actually Applies for the CGTMSE Guarantee<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.entrepreneurindia.co\/blogs\/collateral-free-loan\/#NPCS_Insight\" >NPCS Insight<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.entrepreneurindia.co\/blogs\/collateral-free-loan\/#Get_Detailed_Insights_from_This_Book_Select_Start_Your_Own_Industry\" >Get Detailed Insights from This Book: Select &amp; Start Your Own Industry<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.entrepreneurindia.co\/blogs\/collateral-free-loan\/#Collateral-Free_Lending_Layers\" >Collateral-Free Lending Layers<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/www.entrepreneurindia.co\/blogs\/collateral-free-loan\/#Manufacturing_Categories_Well-Suited_to_CGTMSE-Backed_Loans\" >Manufacturing Categories Well-Suited to CGTMSE-Backed Loans<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/www.entrepreneurindia.co\/blogs\/collateral-free-loan\/#PMEGP_CGTMSE_How_the_Two_Combine\" >PMEGP + CGTMSE: How the Two Combine<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/www.entrepreneurindia.co\/blogs\/collateral-free-loan\/#Your_investment_deserves_the_right_opportunity\" >Your investment deserves the right opportunity<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/www.entrepreneurindia.co\/blogs\/collateral-free-loan\/#The_Realistic_Picture\" >The Realistic Picture<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/www.entrepreneurindia.co\/blogs\/collateral-free-loan\/#Frequently_Asked_Questions\" >Frequently Asked Questions<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/www.entrepreneurindia.co\/blogs\/collateral-free-loan\/#Sources_and_Further_Reading\" >Sources and Further Reading<\/a><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"Collateral_Free_Loans_for_Manufacturing_Units_Under_CGTMSE\"><\/span><strong>Collateral Free Loans for Manufacturing Units Under CGTMSE<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>\u201cCollateral-free\u201d is a phrase that is one of the most searched terms in the Indian MSME finance segment and is one of the most used ones. Many business owners hear this and think that they will get a loan for a business plan with no security, because the government has declared it. The truth is more particular \u2014 and knowing how it works is the key to using it, as an entrepreneur.<\/p>\n<p>The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) is not a lender and does not provide any loans. It guarantees 75 to 85 percent of the loan amount to banks and NBFCs and the lender does not require any collateral or a third-party guarantee from the borrower. The loan is still from a bank, still goes through credit appraisal, and still needs to show the bank repayment capacity \u2014 the only difference is that the borrower&#8217;s need to pledge a property or other assets is no longer a deciding factor for approving the loan.<\/p>\n<p>Micro enterprises can avail loans without CGTMSE involvement in the entire process with extension of loans by banks without any collateral up to \u20b910 lakh. Apart from that, CGTMSE facilitates the provision of credit facility without the requirement of collateral to the extent of \u20b910 crores, which has a guarantee coverage of up to 75% to 90% depending on the loan size and the class of borrower.<\/p>\n<h3 class=\"wp-block-heading has-text-align-center\" style=\"text-align: center;\"><span class=\"ez-toc-section\" id=\"Related_Article_Collateral-Free_Business_Loan_up_to_%E2%82%B910_Crore_in_India_Complete_CGTMSE_Guide_for_MSMEs\"><\/span>Related Article: <a href=\"https:\/\/www.niir.org\/blog\/collateral-free-business\/\" target=\"_blank\" rel=\"noopener\">Collateral-Free Business Loan up to \u20b910 Crore in India: Complete CGTMSE Guide for MSMEs<\/a><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<h2><span class=\"ez-toc-section\" id=\"What_%E2%80%9CCollateral-Free%E2%80%9D_Actually_Means_Under_CGTMSE\"><\/span><strong>What \u201cCollateral-Free\u201d Actually Means Under CGTMSE<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Actually, there are two layers to the collateral-free lending of a small manufacturing unit in India: The first layer is a basic RBI guideline where banks can provide collateral-free loans to Micro and Small Enterprises up to \u20b910 lakh without having any guarantee scheme in place \u2014 this is a normal practice for loans where the limit of loan amount is not more than \u20b910 lakh, if the unit is meeting the bank&#8217;s normal credit criteria.<\/p>\n<p>The second layer is CGTMSE, which extends collateral-free lending well beyond \u20b910 lakh \u2014 up to \u20b910 crore for Micro and Small Enterprises (classic) and up to \u20b920 crore for startups recognised by DPIIT. Here, the bank does full credit appointments (DPR, financial projections and more) and the amount of exposure is guaranteed by the CGTMSE (and not by the borrower&#8217;s pledge of collateral).<\/p>\n<p>The real-world meaning: \u201ccollateral-free\u201d is not the same as \u201cno appraisal\u201d or \u201cno promoter contribution.\u201d It also means that the entrepreneur would not be required to pledge any asset, including property, gold or any other asset, as security to the bank for approving the loan, thus eliminating the single biggest hurdle faced by many competent entrepreneurs, especially the first generation and women entrepreneurs, in getting formal credit loans.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Why_Low-Investment_Manufacturing_Units_Fit_This_Mechanism_Well\"><\/span><strong>Why Low-Investment Manufacturing Units Fit This Mechanism Well<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The manufacturing units that are covered in our companion guide on business ideas that can be undertaken under CGTMSE are in the \u20b95-25 lakh category, which is exactly the target segment for CGTMSE lending. The projects are big enough to likely be too much for an entrepreneur to self-fund, or borrow on his own without any outside guarantees, but small enough that even at the lower end of the guaranteed percent range, with CGTMSE&#8217;s loan, the project would qualify for a loan.<\/p>\n<p>In the case of these categories, CGTMSE coverage may also be covered by PMEGP margin money in the same loan package: PMEGP subsidy reduces the amount of loan, CGTMSE guarantees that the loan amount is sanctioned without collateral. What is often overlooked is that the most of PMEGP loans are automatically extended under CGTMSE, meaning that by design the schemes work together without requiring the entrepreneur to apply for CGTMSE separately for his loan.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Manufacturing_Categories_That_Work_Well_Under_This_Structure\"><\/span><strong>Manufacturing Categories That Work Well Under This Structure<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The categories of projects most often financed this way include food and agro-processing units, such as spice processing, cold pressed oil, dal milling, papad and instant mix production, because the size of the project in these cases is usually between \u20b910-25 lakh, and machinery suppliers are established and the cost estimates and quotations are easily available, as the appraisal team at most banks have encountered many such applications.<\/p>\n<p>The same holds true for soap, detergent and agarbatti production lines \u2014 the project cost is not very high, there is a basic knowledge of the formulation and machinery, and the market analysis section of the DPR is not that difficult to be substantiated with real market data as opposed to market projections.<\/p>\n<p>A slightly separate group are packaging and printing units that provide service to other area small manufacturing companies that can include corrugated boxes, printed labels, or flexible packaging: while they may not be supplying end users directly, they can have more of a B2B revenue stream, as long as a few anchor customers are in place.<\/p>\n<p>The other low investment area is the stitching unit for garments or textiles which are meant for institutional users (school uniform, workwear for local businesses, hospital linen, etc.) instead of retail. In such cases, it is likely that the project costs for a modest unit (sewing machines, cutting tables, basic finishing equipment) will remain less than \u20b915 lakh.<\/p>\n<h2 style=\"text-align: center;\"><span class=\"ez-toc-section\" id=\"Get_Detailed_Project_Report_DPR_Project_Reports_Profiles\"><\/span>Get Detailed Project Report (DPR): <a href=\"https:\/\/www.niir.org\/profile-project\" target=\"_blank\" rel=\"noopener\">Project Reports &amp; Profiles<\/a><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<figure id=\"attachment_8879\" aria-describedby=\"caption-attachment-8879\" style=\"width: 848px\" class=\"wp-caption alignnone\"><img fetchpriority=\"high\" decoding=\"async\" class=\"size-full wp-image-8879\" src=\"https:\/\/www.entrepreneurindia.co\/blogs\/wp-content\/uploads\/2026\/07\/Gemini_Generated_Image_jzmtpijzmtpijzmt.webp\" alt=\"Collateral Free Loans for Manufacturing Units Under CGTMSE\" width=\"848\" height=\"1264\" srcset=\"https:\/\/www.entrepreneurindia.co\/blogs\/wp-content\/uploads\/2026\/07\/Gemini_Generated_Image_jzmtpijzmtpijzmt.webp 848w, https:\/\/www.entrepreneurindia.co\/blogs\/wp-content\/uploads\/2026\/07\/Gemini_Generated_Image_jzmtpijzmtpijzmt-201x300.webp 201w, https:\/\/www.entrepreneurindia.co\/blogs\/wp-content\/uploads\/2026\/07\/Gemini_Generated_Image_jzmtpijzmtpijzmt-687x1024.webp 687w, https:\/\/www.entrepreneurindia.co\/blogs\/wp-content\/uploads\/2026\/07\/Gemini_Generated_Image_jzmtpijzmtpijzmt-768x1145.webp 768w, https:\/\/www.entrepreneurindia.co\/blogs\/wp-content\/uploads\/2026\/07\/Gemini_Generated_Image_jzmtpijzmtpijzmt-150x224.webp 150w, https:\/\/www.entrepreneurindia.co\/blogs\/wp-content\/uploads\/2026\/07\/Gemini_Generated_Image_jzmtpijzmtpijzmt-750x1118.webp 750w\" sizes=\"(max-width: 848px) 100vw, 848px\" \/><figcaption id=\"caption-attachment-8879\" class=\"wp-caption-text\">Low-investment manufacturing businesses can access collateral-free finance.<\/figcaption><\/figure>\n<h2><span class=\"ez-toc-section\" id=\"The_Guarantee_Fee_%E2%80%94_What_It_Costs_to_Use_CGTMSE_Coverage\"><\/span><strong>The Guarantee Fee \u2014 What It Costs to Use CGTMSE Coverage<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>CGTMSE coverage is not at no cost to the lender; in fact, that cost is generally borne by the borrower, either in full or in part, as part of the overall loan cost. The trust pays an annual guarantee fee beginning at a small fraction of the guaranteed amount, to keep the cover in place. If an entrepreneur is considering loan offers, this fee is one he or she should not ignore as it is a true cost of the loan; it is small compared to not taking out a loan or having to place personal or family assets as collateral.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Who_Actually_Applies_for_the_CGTMSE_Guarantee\"><\/span><strong>Who Actually Applies for the CGTMSE Guarantee<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>It may be confusing to many first-time applicants: the entrepreneur does not apply to CGTMSE directly. The entrepreneur applies for the loan as usual with the bank or NBFC and the bank applies for the guarantee cover with CGTMSE, if it finds that the loan application qualifies and it decides to consider the loan as unsecured, it does so. For the entrepreneur, it&#8217;s a typical loan application, except for what happens when the loan is granted at the bank.<\/p>\n<p>This implies that an entrepreneur can&#8217;t force the bank to avail CGTMSE coverage of his loan; it&#8217;s the bank&#8217;s choice if it will take the loan to the CGTMSE. What an entrepreneur can do is to ensure that the application is structured in a manner (project cost, category, sector) that makes it a natural fit for CGTMSE backed lending which most manufacturing units fall within the category of cost ranges of \u20b95-25 lakh are already.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"NPCS_Insight\"><\/span><strong>NPCS Insight<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The financial projections, DSCR, market analysis, and project cost validation are the criteria used in an appraisal, and are the same for a DPR prepared for a bank-ready loan as for a DPR prepared for a <a href=\"https:\/\/npcsblog.com\/cgtmse-loan-scheme-for-msme-collateral-free-loan\/\" target=\"_blank\" rel=\"noopener\">CGTMSE-eligible loan<\/a>. But what is the means of finance framing \u2013 The absence of a collateral pledge should not be seen as a gap in the application, rather it should be viewed as a structural element that the bank will take care of when looking at the application as a whole in CGTMSE. NPCS prepares DPRs for manufacturing units in this category with the above framing.<\/p>\n<h3 style=\"text-align: center;\"><span class=\"ez-toc-section\" id=\"Get_Detailed_Insights_from_This_Book_Select_Start_Your_Own_Industry\"><\/span>Get Detailed Insights from This Book:<a href=\"https:\/\/www.niir.org\/books\/book\/select-start-your-own-industry-4th-revised-edition\/isbn-9789381039151\/zb,,1d,a,0,0,a\/index.html\" target=\"_blank\" rel=\"noopener\"> Select &amp; Start Your Own Industry<\/a><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<h2><span class=\"ez-toc-section\" id=\"Collateral-Free_Lending_Layers\"><\/span><strong>Collateral-Free Lending Layers<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<table>\n<thead>\n<tr>\n<td><strong>Loan Range<\/strong><\/td>\n<td><strong>Mechanism<\/strong><\/td>\n<td><strong>Guarantee Coverage<\/strong><\/td>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Up to \u20b910 lakh<\/td>\n<td>RBI baseline guideline; no scheme needed<\/td>\n<td>Not applicable<\/td>\n<\/tr>\n<tr>\n<td>Above \u20b910 lakh up to \u20b92 crore<\/td>\n<td>CGTMSE-backed bank lending<\/td>\n<td>75-85% of loan amount<\/td>\n<\/tr>\n<tr>\n<td>Above \u20b92 crore up to \u20b910 crore<\/td>\n<td>CGTMSE-backed bank lending<\/td>\n<td>75% (varies by category)<\/td>\n<\/tr>\n<tr>\n<td>Up to \u20b920 crore (DPIIT-recognised startups)<\/td>\n<td>CGTMSE-backed bank lending<\/td>\n<td>Higher ceiling for recognised startups<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<h2><span class=\"ez-toc-section\" id=\"Manufacturing_Categories_Well-Suited_to_CGTMSE-Backed_Loans\"><\/span><strong>Manufacturing Categories Well-Suited to CGTMSE-Backed Loans<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<table>\n<thead>\n<tr>\n<td><strong>Category<\/strong><\/td>\n<td><strong>Typical Project Cost<\/strong><\/td>\n<td><strong>Why It Fits<\/strong><\/td>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Spice \/ agro-processing units<\/td>\n<td>\u20b910-25 lakh<\/td>\n<td>Established machinery suppliers, predictable local demand<\/td>\n<\/tr>\n<tr>\n<td>Soap, detergent, agarbatti units<\/td>\n<td>\u20b95-20 lakh<\/td>\n<td>Modest cost, consistent demand, formulation know-how documented<\/td>\n<\/tr>\n<tr>\n<td>Packaging &amp; printing units (B2B)<\/td>\n<td>\u20b910-20 lakh<\/td>\n<td>Anchor B2B customers provide predictable revenue base<\/td>\n<\/tr>\n<tr>\n<td>Garment\/textile stitching (institutional)<\/td>\n<td>\u20b95-15 lakh<\/td>\n<td>Lower entry cost, institutional buyer contracts aid viability case<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<h2><span class=\"ez-toc-section\" id=\"PMEGP_CGTMSE_How_the_Two_Combine\"><\/span><strong>PMEGP + CGTMSE: How the Two Combine<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<table>\n<thead>\n<tr>\n<td><strong>Component<\/strong><\/td>\n<td><strong>Source<\/strong><\/td>\n<td><strong>Role<\/strong><\/td>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Own contribution (5-10%)<\/td>\n<td>Entrepreneur<\/td>\n<td>Demonstrates promoter commitment<\/td>\n<\/tr>\n<tr>\n<td>Margin money subsidy (15-35%)<\/td>\n<td>PMEGP \/ KVIC<\/td>\n<td>Reduces effective loan principal post-verification<\/td>\n<\/tr>\n<tr>\n<td>Bank loan (remaining balance)<\/td>\n<td>Bank\/NBFC<\/td>\n<td>Term loan, often covered under CGTMSE<\/td>\n<\/tr>\n<tr>\n<td>Collateral requirement<\/td>\n<td>CGTMSE guarantee<\/td>\n<td>Removes need for personal\/family asset pledge<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><strong style=\"color: #212121; font-size: 1.953em;\">Preparing an Application for CGTMSE-Backed Lending<\/strong><\/p>\n<p>Since the appraisal requirements for a CGTMSE-eligible loan are the same as for any other bank loan \u2014 project cost validation, market analysis, financial projections, and debt service \u2014 the most helpful preparation an entrepreneur can make is what happens in our companion guide on writing a bank-approvable DPR \u2014 realistic costs supported by quotations, local market data, and financial projections that pass the stress test.<\/p>\n<p>Niir Project Consultancy Services prepares detailed project reports for low investment manufacturing units in the below mentioned categories, where absence of collateral is not a financing-structure issue of the bank and is rather treated as a separate issue during the application process where the bank has to be specifically requested to address this issue.<\/p>\n<h3 style=\"text-align: center;\"><span class=\"ez-toc-section\" id=\"Your_investment_deserves_the_right_opportunity\"><\/span><a href=\"https:\/\/www.niir.org\/startup-selector\" target=\"_blank\" rel=\"noopener\"> <strong data-start=\"272\" data-end=\"322\">Your investment deserves the right opportunity<\/strong><\/a><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<h2><span class=\"ez-toc-section\" id=\"The_Realistic_Picture\"><\/span><strong>The Realistic Picture<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>While not a description of a loan that avoids appraisal, 100% collateral-free is a correct description of how CGTMSE works for the borrower: the borrower does not have to place any property, gold or other personal assets as a pledge. In the case of low investment manufacturing units of \u20b95-25 lakh, the only realistic way is to submit a well-prepared DPR to the bank, leaving out any collateral constraint as this is usually waived in case of <a href=\"https:\/\/www.entrepreneurindia.co\/blogs\/pmegp-loan-scheme-2026\/\">PMEGP loans<\/a>, and the entrepreneur does not have to go through yet another application procedure on top of the loan application.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Frequently_Asked_Questions\"><\/span><strong>Frequently Asked Questions<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><strong>Is there any automatic coverage of CGTMSE for all PMEGP loan?<\/strong><\/p>\n<p>One reason why the demand for collateral is seldom made by the PMEGP-funded units is that most of these loans are covered under CGTMSE as a standard feature of the loan. This is calculated by the bank during the loan application process and is not one application by the entrepreneur.<\/p>\n<p><strong>If the loan doesn&#8217;t need collateral, does that mean it doesn&#8217;t need a personal guarantee?<\/strong><\/p>\n<p>The specific coverage by CGTMSE includes the requirement for collateral and third party guarantees. The promoter&#8217;s personal commitment can be in the form of normal banking documentation, though this is not the same as pledging assets as security.<\/p>\n<p><strong>Does an existing business need to have any assets to use CGTMSE or is it for businesses that have no assets?<\/strong><\/p>\n<p>Lending with CGTMSE support is provided even if the entrepreneur does not have any assets to pledge. Some business owners who have assets would rather not make that pledge, even if they were able to, and CGTMSE coverage would permit the loan to move forward without the pledge.<\/p>\n<p><strong>Is there a correlation between loan amount and level of coverage for CGTMSE?<\/strong><\/p>\n<p>Guarantee coverage percentages are different for different loan sizes, for different types of borrowers and usually range from 75% to 90%, depending on the type of guarantee and the size of the loan. The percentage is determined by the bank when processing a CGTMSE application for a particular loan.<\/p>\n<p><strong>Who pays the guarantee fee and what is it?<\/strong><\/p>\n<p>CGTMSE coverage is paid for each year, beginning at a very small percentage of the guaranteed loan amount. This cost is usually covered in the cost of the loan by the bank and not charged to the entrepreneur separately, but should be included in the overall cost of the loan and taken into account when working financial projections.<\/p>\n<p><strong>Where can an entrepreneur get a DPR prepared for a low-investment manufacturing unit seeking a CGTMSE-backed loan?<\/strong><\/p>\n<p>Niir Project Consultancy Services develop comprehensive project reports for manufacturing units in the price range of \u20b95-25 lakh within the following industry segments: Agro-processing, Soaps and Detergents, Packaging, Textile stitching etc. for bank appraisal for the support schemes like PMEGP, Mudra and CGTMSE schemes.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Sources_and_Further_Reading\"><\/span><strong>Sources and Further Reading<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>IIFL \u2013 Collateral Free MSME Loan: CGTMSE 2026 Limits, Eligibility &amp; How to Apply: <a href=\"https:\/\/www.iifl.com\/blogs\/business-loan\/collateral-free-msme-loan\" target=\"_blank\" rel=\"noopener\">iifl.com<\/a><\/p>\n<p>Bajaj Finserv \u2013 CGTMSE Scheme: Collateral-Free MSME Loan Guide: <a href=\"https:\/\/www.bajajfinserv.in\/cgtmse-scheme\" target=\"_blank\" rel=\"noopener\">bajajfinserv.in<\/a><\/p>\n<p>DMI Finance \u2013 Collateral-Free CGTMSE Loan Scheme: Full Guide: <a href=\"https:\/\/www.dmifinance.in\/cgtmse-loan-scheme\/\" target=\"_blank\" rel=\"noopener\">dmifinance.in<\/a><\/p>\n<p>AIM India \u2013 CGTMSE Scheme 2026: Apply for Collateral-Free MSME Loans: <a href=\"https:\/\/aimindia.in\/cgtmse-scheme-2026\/\" target=\"_blank\" rel=\"noopener\">aimindia.in<\/a><\/p>\n<p>HDFC Bank \u2013 CGTMSE: Credit Guarantee Fund Trust for Micro and Small Enterprises: <a href=\"https:\/\/www.hdfc.bank.in\/msme-banking\/msme-government-schemes\/credit-guarantee-fund-trust-for-micro-and-small-enterprises-cgtmse\" target=\"_blank\" rel=\"noopener\">hdfc.bank.in<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Collateral Free Loans for Manufacturing Units Under CGTMSE \u201cCollateral-free\u201d is a phrase that is one of the most searched terms in the Indian MSME finance segment and is one of the most used ones. Many business owners hear this and think that they will get a loan for a business plan with no security, because [&hellip;]<\/p>\n","protected":false},"author":16,"featured_media":8881,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"jnews-multi-image_gallery":[],"jnews_single_post":{"format":"standard","override":[{"template":"2","parallax":"1","fullscreen":"1","layout":"right-sidebar","sidebar":"default-sidebar","second_sidebar":"default-sidebar","sticky_sidebar":"1","share_position":"topbottom","share_float_style":"share-monocrhome","show_share_counter":"1","show_view_counter":"1","show_featured":"1","show_post_meta":"1","show_post_author":"1","post_date_format":"default","post_date_format_custom":"Y\/m\/d","show_post_category":"1","show_post_reading_time":"0","post_reading_time_wpm":"300","post_calculate_word_method":"str_word_count","show_zoom_button":"0","zoom_button_out_step":"2","zoom_button_in_step":"3","show_post_tag":"1","show_prev_next_post":"1","show_popup_post":"1","show_comment_section":"1","number_popup_post":"1","show_author_box":"1","show_post_related":"0","show_inline_post_related":"0"}],"image_override":[{"single_post_thumbnail_size":"crop-500","single_post_gallery_size":"crop-500"}],"trending_post_position":"meta","trending_post_label":"Trending","sponsored_post_label":"Sponsored by","disable_ad":"0","subtitle":"How CGTMSE backed lending works, what types of small manufacturing companies can easily apply to it, and what the term '100% collateral free' really means in practice."},"jnews_primary_category":[],"jnews_social_meta":[],"jnews_paywall_metabox":{"paragraph_limit":"2","enable_premium_post":"0","enable_free_post":"0","override_paragraph_limit":"0","enable_preview_post":"0","enable_preview_video":"0"},"jnews_override_counter":{"view_counter_number":"0","share_counter_number":"0","like_counter_number":"0","dislike_counter_number":"0"},"footnotes":""},"categories":[1227,1226,1169],"tags":[2515,2519,2516,2518,2396,2520,2517],"class_list":["post-8876","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-government-schemes-policies","category-investment-funding","category-market-research-trends","tag-cgtmse-loan","tag-cgtmse-scheme","tag-collateral-free-loan","tag-collateral-free-msme-loan","tag-manufacturing-business-loan","tag-manufacturing-unit-finance","tag-msme-loan"],"_links":{"self":[{"href":"https:\/\/www.entrepreneurindia.co\/blogs\/wp-json\/wp\/v2\/posts\/8876","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.entrepreneurindia.co\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.entrepreneurindia.co\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.entrepreneurindia.co\/blogs\/wp-json\/wp\/v2\/users\/16"}],"replies":[{"embeddable":true,"href":"https:\/\/www.entrepreneurindia.co\/blogs\/wp-json\/wp\/v2\/comments?post=8876"}],"version-history":[{"count":1,"href":"https:\/\/www.entrepreneurindia.co\/blogs\/wp-json\/wp\/v2\/posts\/8876\/revisions"}],"predecessor-version":[{"id":8880,"href":"https:\/\/www.entrepreneurindia.co\/blogs\/wp-json\/wp\/v2\/posts\/8876\/revisions\/8880"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.entrepreneurindia.co\/blogs\/wp-json\/wp\/v2\/media\/8881"}],"wp:attachment":[{"href":"https:\/\/www.entrepreneurindia.co\/blogs\/wp-json\/wp\/v2\/media?parent=8876"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.entrepreneurindia.co\/blogs\/wp-json\/wp\/v2\/categories?post=8876"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.entrepreneurindia.co\/blogs\/wp-json\/wp\/v2\/tags?post=8876"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}