Government-backed business loans: how guarantee schemes help you borrow without collateral
A government-backed business loan is an ordinary loan from a bank or NBFC that a government guarantee scheme partly covers, so the lender can lend without collateral. The guarantee protects the lender, not the borrower: CGTMSE, for example, covers 75% to 90% of eligible loans to micro and small enterprises. It suits a business that wants to borrow without pledging property.
Capnix is not a lender and does not provide or guarantee any government loan. Approval, eligibility, scheme terms and availability stay with the lender or the scheme. We work out which routes fit your business, get your file loan ready, share it with lenders on our panel only after you give consent, and run the lender application. Getting your loan through us costs you nothing.
- Loan
- Government-backed MSME Loans
- Decided by
- The lender
- Cost to you
- ₹0
- Last checked
The facts that matter
| Fact | What it means | Source |
|---|---|---|
| How a scheme loan starts | You apply to a lender registered with the scheme. After sanction, the lender applies for cover. Borrowers do not apply to CGTMSE directly. | CGTMSE website Checked 02-Oct-2026 |
| The debt stays yours | A guarantee claim paid to the lender does not cancel the borrower's debt. | CGTMSE scheme document, updated 01-Apr-2026 Checked 02-Oct-2026 |
| Loans above ₹50,00,000 | The lender must rate the loan internally, and the rating must be investment grade. | CGTMSE scheme document, updated 01-Apr-2026 Checked 02-Oct-2026 |
| Collateral without any scheme | Banks may not take collateral on loans up to ₹20,00,000 to micro and small enterprises sanctioned or renewed from 01-Apr-2026. |
RBI notification, 09-Feb-2026 Checked 02-Oct-2026 |
| PSB loans in 59 minutes | A portal that gives an in-principle approval in 59 minutes. It is not a sanction or a disbursal. |
PIB release on PSB Loans in 59 Minutes, 01-Jul-2019 Checked 02-Oct-2026 |
How a government-backed loan works
The government or its trust guarantees the lender, not you. You apply to the lender. After it sanctions the loan, the lender applies for cover. If the loan defaults, the scheme pays part of the lender's loss.
The debt stays yours. A claim paid to the lender does not cancel what you owe.
Source: CGTMSE website, checked 02-Oct-2026.
The guarantee routes, by loan size
Each route below is run by the scheme owner and offered through lenders. Availability and terms change, so ask the lender.
| Route | What it covers | Source |
|---|---|---|
| Mudra loans, up to ₹20,00,000 | Loans under the Pradhan Mantri Mudra Yojana are guaranteed under the Credit Guarantee Fund for Micro Units, run by NCGTC. |
PIB release on Mudra, 08-Apr-2025 Checked 02-Oct-2026 |
| CGTMSE, up to ₹10,00,00,000 at banks | Cover of 75% to 90% on collateral-free loans to micro and small enterprises, set by borrower type. | CGTMSE scheme document, updated 01-Apr-2026 Checked 02-Oct-2026 |
| MCGS-MSME, machinery loans | 60% cover for lenders on machinery loans up to ₹1,00,00,00,000. |
PIB release on MCGS-MSME, 21-Mar-2026 Checked 02-Oct-2026 |
| Micro Credit Card, up to ₹5,00,000 | A revolving limit for Udyam-registered micro enterprises with 75% cover. Whether banks are issuing it is not yet confirmed. |
CGTMSE circular 259, 18-Mar-2026 Checked 02-Oct-2026 |
| TReDS invoice discounting | 75% cover where buyer and seller are both micro or small enterprises, up to ₹2,00,00,000 for each seller. |
CGTMSE circular 262, 15-Jun-2026 Checked 02-Oct-2026 |
| PM Vishwakarma, for artisans | Collateral-free loans of ₹1,00,000 and then ₹2,00,000 at a concessional 5% rate, with government interest support. |
PIB explainer on PM Vishwakarma, 16-Sep-2025 Checked 02-Oct-2026 |
Who pays for the guarantee
A guarantee has a cost. It starts with the lender and can reach you.
| Point | What applies | Source |
|---|---|---|
| CGTMSE fee slabs, a year | 0.37% up to ₹10,00,000. 0.55% above that to ₹50,00,000. 0.60% to ₹1,00,00,000. 0.85% to ₹2,00,00,000. 1.00% to ₹5,00,00,000. 1.10% to ₹8,00,00,000. 1.20% to ₹10,00,00,000. | CGTMSE scheme document, updated 01-Apr-2026 Checked 02-Oct-2026 |
| What the fee is charged on | The guaranteed amount in the first year, and the outstanding amount after. | CGTMSE scheme document, updated 01-Apr-2026 Checked 02-Oct-2026 |
| Who pays | The lender pays CGTMSE and may recover the amount from you. | CGTMSE scheme document, updated 01-Apr-2026 Checked 02-Oct-2026 |
| Concessions | A 10% concession for women, SC/ST and some other groups, and further concessions by region and status, up to 30% in all. | CGTMSE scheme document, updated 01-Apr-2026 Checked 02-Oct-2026 |
| Mudra guarantee fee | At Bank of Maharashtra, the borrower bears the guarantee fee. Other lenders may differ. |
PIB release on Mudra, 08-Apr-2025 Checked 02-Oct-2026 |
Public portals that route government-backed loans
Two public portals touch these loans.
| Portal | What it does | Source |
|---|---|---|
| JanSamarth | Public sector banks source MSME loan applications on this portal, for loans within thresholds that each bank sets. |
PIB release on digital MSME lending, 19-Jan-2026 Checked 02-Oct-2026 |
| Credit Assessment Model | Public sector banks score digital footprints: GST, tax returns, account aggregator bank statements and bureau data. It covers businesses without formal accounts. | PIB release on the Credit Assessment Model, 2025 Checked 02-Oct-2026 |
| Results | From 01-Apr-2025 to 31-Dec-2025, public sector banks sanctioned over 3,96,000 MSME loan applications under these programmes. |
PIB release on digital MSME lending, 19-Jan-2026 Checked 02-Oct-2026 |
| PSB Loans in 59 Minutes | Gives an in-principle approval in 59 minutes. It is not a sanction. Its fee and amount range are not confirmed here, so check the portal. |
PIB release on PSB Loans in 59 Minutes, 01-Jul-2019 Checked 02-Oct-2026 |
What a guarantee does not do
No scheme guarantees that you will get a loan.
- The lender still assesses eligibility, documents, credit profile and business strength.
- Above ₹50,00,000, the lender must rate the loan internally and the rating must be investment grade.
- A paid claim does not cancel your debt.
Source: CGTMSE scheme document, updated 01-Apr-2026, checked 02-Oct-2026.
Worked example: the CGTMSE fee on a ₹40,00,000 loan
A micro enterprise gets a collateral-free working capital loan of ₹40,00,000 from a bank, with 75% CGTMSE cover. The loan falls in the slab above ₹10,00,000 to ₹50,00,000, where the standard fee is 0.55% a year. The fee is charged on the guaranteed amount in the first year.
| Item | Amount |
|---|---|
| Loan amount | ₹40,00,000 |
| Guaranteed amount at 75% | ₹30,00,000 |
| Standard fee rate for the slab | 0.55% a year |
| Fee in year one | ₹16,500 |
This is before any lender-specific premium or discount, which the scheme sets by lender. The lender pays the fee and may recover it from you.
Source: CGTMSE scheme document, updated 01-Apr-2026, checked 02-Oct-2026.
Who it suits and who it does not
A strong fit if
- Your business is registered on Udyam
- You want to explore scheme-linked funding options
- You need help preparing a complete lender-ready file
Not a fit if
- You expect a guarantee to guarantee approval
- You need a loan from a lender that is not registered with the scheme
How Capnix fits
- Start with your free Capnix score. Itshows what a lender reads before it applies for cover.
- We share nothing about your loan requirement with a lender or a Lender Partner before you give consent. Withdraw that consent in your Capnix account at any time.
- We never claim to get you a scheme. Mudra, for example, uses no agents. The lender pays Capnix after disbursal, and getting your loan through us costs you nothing.
More than a loan. A team that gets you there
Help with scheme fit
We map your business profile to the routes that may suit it, instead of treating every scheme as right for every business.
Lender-ready documentation
We help you organise the business, registration, financial and promoter records lenders usually need.
Where this helps
- Explore funding routes for small businesses
- Use your Udyam and business registration in the loan case
- Prepare documents for lenders that use guarantee schemes
- Compare scheme-linked and regular business loans
What happens after you start
We work out your Capnix score first, then work the lender applications with you until the money is disbursed.
See how it worksLoan products, rates, and eligibility are determined by the lenders on our panel. Capnix is not a lender and does not lend its own capital. We run your loan journey end to end.
Have a question?
Find answers here
Whether you are scaling up, smoothing cash flow, or buying new equipment, we take your file to the right lender and stay with it through to disbursal.
Read your eligibility. Matched to the right route
Scheme-linked lending depends on eligibility, documentation, lender participation, and current policy. We read your business profile and registration before suggesting a route.
From there we help prepare your case for suitable lenders or schemes, while keeping clear that final approval and terms remain with the lender or program.
Real people,
start to disbursal.
No hand-offs and no generic replies. A dedicated team
works the lenders while you keep running your business.