Collateral Free Loan in India

Collateral Free Loan

Obtaining Collateral Free Loan in India

The Credit Guarantee Fund Trust for Micro and Small Enterprises Scheme (CGTMSE Scheme) provides a framework for Entrepreneurs to obtain collateral free loan in India. However, many of the Entrepreneurs starting a Business in India find it hard to obtain a collateral free loan under the CGTMSE scheme due to lack of understanding of Banking Principle and Practices. In this article, we provide practical tips for availing a collateral free loan from banks under the CGTMSE Scheme.

Tip #1: Prepare a Detailed Project Report or Business Plan

One of the main challenge for any Entrepreneur is raising funds and keep the business funded. For raising loans from Banks or equity from investors, one of the vital tool or document is a well crafted detailed project report or a business plan. A detailed project report is essential for a bank credit officers to understand the business model, projected cash flows and appraise the request for loan. A well thought-out project report would prove to the credit appraiser that you are serious about the business idea and is well planned. Therefore, preparing a detailed project report or business plan is the first step in obtaining a collateral free loan in India.

Tip#2: Ensure your request is Bankable

While drafting the project report and while making the request to the banker for a loan under the CGTMSE scheme, ensure your request is bankable and within the banking framework. Banks norms in India does not currently allow for loans which will be used for Research & Development, creation of intangible assets or marketing expenses. Therefore, the request for CGTMSE loan must preferably be backed by a business plan that involves capital asset creation by way of term loan and working capital facility which will be used for building current assets.

Also, entities like Private Limited Company or Limited Liability Partnership, enjoy easier access to credit or equity infusion when compared to a Proprietorship or Partnership. Therefore, it is advisable to incorporate a business entity and make the request in the name of the entity.

Tip#3: Choose the right Bank and Branch

Loans under the CGTMSE scheme are considered more risky than loans backed by immovable assets. So, small and regional banks are more averse to sanctioning loans under the CGTMSE scheme when compared to large nationalized banks. Entrepreneurs must network with other business owners enjoying loan under the CGTMSE scheme and determine a good bank and branch for making the loan application. A good bank and branch selection while making the loan application will play a large part in the loan sanction process and determine the success of the proposal.

Tip #4: Build a Rapport and Ensure the Banker understands your Business

CGTMSE schemes are backed solely on the Entrepreneurs experience, skill and ability to run a successful business. So, the Entrepreneur must build a rapport with the Banker and ensure he/she understand the business model and believes the vision of the promoter. Entrepreneurs applying for loan under the CGTMSE scheme must therefore build a strong relationship with the Banker.

Tip #5: Be Patient

The loan appraisal and sanctioning process could take anywhere between 1-3 or more months in India. Hence, the Entrepreneur must plan ahead and be patient through the loan processing period. Showing haste or anxiousness during the loan processing period could be interpreted by the Banker as signs of lack of financial discipline and planning.

CGTMSE Scheme Overview

The CGTMSE Scheme provides a framework for entrepreneurs, small scale industries and medium sized enterprises to obtain a loan of upto Rs.1 crore without any collateral in India. Many of the Banks in India actively provide collateral free loans under the CGTMSE Scheme in India and the same can be availed when an application is made in the prescribed manner within the framework. More information about CGTMSE Scheme and the list of banks providing loan under the CGTMSE scheme can found in another article titled Loan without Collateral in India.

Comments (14)


Dec 01, 2014 at 5:13 PM

I am already doing pappad and pickles making business I started at in my house but step by step my business growing now I want machinery so that why i need Loan


Dec 06, 2014 at 3:15 PM

I am running a two wheeler showroom I have stock since 1&half year I need loan to increase the stock

Carmen Torres

May 06, 2015 at 12:04 AM

Dear Friend,

We are investors who are interested in funding your project of any kind. But please note we either fund your project by cash fund or by Bank Guarantee(BG) SBLC such as MT103 and MT760. You are advised to have our office furnished with all details of your project plan as well as the funding type you may be comfortable with via [email protected]

Hope to here back from you soon.

Shailendra Singh

May 29, 2015 at 6:47 PM

Can we speak? We need finance to the tune of 500 to 600 lacs.


Jun 03, 2015 at 8:01 PM

May I know that borrower must file IT return in past years for Appling loan under CGTMSE scheme


Jun 21, 2015 at 1:40 PM

Dear Sir
At present we are doing online business of Mobile Accessories and Computer Accessories by Snapdeal, Flipkart,ebay,Shopclues etc.

We are interested to grow our business by more inventory and more Platform for this we need more investment .

How you can provide us more information for Funding to grow our business ?
We are looking for Investors, Where we can get more Funding for our Business please advice?

We are new Startup and we have developed our own Website http://www.ewindowshopy.com and want to Promote our Website by Social Media and other chanels like News Papers and TV Chanels and so on.

What are your Terms and Conditions? and how long time it will take to Process ?

Please advice us about the Funding Process?

Waiting for your reply. at [email protected]


Jun 22, 2015 at 1:01 PM

Dear sir,
Greetings from IndiaFilings.com, India’s premier online consulting co!!
Please provide your email address and contact number, so that we can ask our business adviser to call you.
Looking forward to work with you in the near future. Have a great day.
Thanks & Regards,
IndiaFilings Team

Aniket Desale

Jul 13, 2015 at 6:06 PM

Sir, We at Maruti Industries established in Oct 2012 engaged in the precise industrial fabrication located at MIDC Nashik. We are supplying products to
1.Transasia Biomedical Ltd
2.ASB International Pvt Ltd
3.Thermofisher Scientific Pvt Ltd etc.
Now it’s our business growth time. But we are unable to process further due to lack of Working Capital & New Machinery. Please help us out. By the way by education I am Mechanical Engineer and Partner of this company.


Oct 06, 2015 at 11:33 AM

non sense they are not advisers …. they dont know anything

Lawrrence Anthony

Oct 20, 2015 at 9:07 PM


Planning to set-up Agro & Food products based new business.

The projects are :

1. Dairy Farming

2. Packed Mineral Water 2000LPH

3. ID Batter Plant

These products been used in our day to day life. So, no risk factor.Ever Green product\business. Demand for the same is always high than Supply.

Total Project cost – 1.65 cr.
Detail Project Reports are ready.
Company registration done.

I am looking for Investor\Loan, please help us on funding.
Waiting for your reply

Thanks & Regards
Lawrrence Anthony


Feb 10, 2016 at 4:16 PM

I am planning to start an small unit of cotton ginning in the outskirts of Nagpur.
I am looking for Investor\Loan, please help us on funding.
Waiting for your reply Email: [email protected]

Thanks & Regards


Feb 19, 2016 at 6:24 AM

Hi Pankaj, we can surely help. Please email your requirements to [email protected] or contact 044-40247777 to talk to an IndiaFilings Business Advisor.

Mumtaz Begum

Apr 10, 2018 at 3:38 PM

iam starting catering business taken place for rent.now i need working capital of 2lakh

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