Micro enterprises employ around 10 crore of India’s population and everyday new companies register and start their business. Every day you see many SMEs and startups setting shop with just a small idea in mind. Many work from home because finding a cheaper source of finance is near impossible in today’s India. Where Fixed Deposit rates are below 7% in most banks, getting a term loan or even a working capital loan at below 13% is almost impossible even after keeping a collateral. Many people take mortgage on their house to fund their idea, many people are willing to pay an absurd amount of interest just to get some loan. During this boom in new entrepreneurs, the government of India has bought across some schemes which not many people are aware of, mainly because no one is promoting them. These schemes are as old as early 2000s.
No bank wants to give you a collateral free loan. Today, we will tell you about 3 such government schemes that you as business owner can get the benefit. It is easy to get a loan of Rs 50 lakh to buy a car, but it is more difficult to access credit to set up a new venture that is likely to generate further employment.


Credit to micro and small enterprises sector is generally perceived as high-risk lending, more so, when there is absence of any collateral. In order to encourage banks to lend more to this sector, Government of India and SIDBI have set up the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) in July 2000, to provide credit guarantee support to collateral free / third-party guarantee free loans up to 200 lakh extended by banks and lending institutions for micro and small enterprise (MSEs) under its Credit Guarantee Scheme (CGS).

Eligibility: New and existing Micro and Small Enterprises engaged in manufacturing or service activity excluding Retail Trade, Educational Institutions, Agriculture, Self Help Groups (SHGs), Training Institutions etc.


  • IT PAN card


  • Business plan – A concrete and feasible business plan needs to be in place to avail the loan.
  • Registration – The organisation/entity should have registered the business as per existing rules.


Accessibility: CGSMSE scheme is available through most private banks, public banks, regional rural banks, foreign banks and some NBFCs
For the full list visit here:

Interest Rate: the maximum interest rate not more than 14% p.a. including cost of guarantee cover

Fees: The borrower has to pay an Annual Guarantee Fee (AGF) and Annual Service Fee (ASF) over and above the annual interest rate.


Annual Guarantee Fee (AGF)


Credit Facility Annual Guarantee Fee (AGF) [% p.a.]  
Women, Micro Enterprises and units in
North East Region (incl. Sikkim)
Upto Rs.5 lakh 0.75 1.00
Above Rs.5 lakh and
upto Rs.200 lakh
0.85 1.00


Annual Service Fee (ASF)


Credit Facility Annual Service Fee %p.a.
Upto Rs. 5 lakh 0.50%
Rs 5 lakh to Rs 100 lakh 0.75%

Collateral Coverage: The guarantee cover available under the scheme is to the extent of upto 85%
Maximum Loan Amount: Rs 200 lakh


The biggest obstacle for MSMEs when it comes to finance is the requirement of collateral for any kind of loan. So, the government approved a scheme called surrogate banking. If your business fulfill certain conditions, the bank will provide you collateral free loans. And that is why not many people know about this type of a product because no bank will promote this product. This product is available by Public Banks as a collateral free lending for MSMEs.

Eligibility: 2 years of existence and IT Returns

Accessibility: Most Public Banks

Requirement: 1. Profitable at cash level   2.  1 crore minimum turnover

Interest Rate: as decided by the banks
Maximum Loan Amount: 30% of last year’s annual turnover

As an SME, do not think you have the disadvantages in terms of the size of your business, the Government is doing everything they can to empower you, and today we have shown you just 3 products that the government has introduced over the past few years. Now it’s time for you to go get the power of finance in your hands and flourish!