Credit Guarantee Fund for Micro Units (CGFMU) Scheme

The Credit Guarantee Fund for Micro Units (CGFMU) is a scheme run by the Government of India, with the trust managed by National Credit Guarantee Trustee Company Ltd. (NCGTC). CGFMU was approved as a fund in 2016 and became effective from 8 April 2015 (loans sanctioned since that date being eligible). The purpose of the scheme is to encourage micro- and small enterprises (especially micro units) to access institutional credit without the need for collateral or third-party guarantee. By offering a guarantee on microloans, CGFMU aims to reduce risk for lenders thereby making it easier for micro-businesses and entrepreneurs to get loans. For you as an MSME or micro-unit, this means easier access to credit, often unsecured, which can help with working capital, expansion, new starts, or business needs.

Key Features
Financial Assistance
Eligibility Criteria
Documents Required
Application Process for the Scheme

Key Features

Credit Guarantee (not direct lending): CGFMU does not itself lend money. Instead, it acts as a guarantor for loans provided by banks, NBFCs or MFIs. This means the lender feels safer extending credit, because part of their risk is covered by the guarantee.
Collateral-free loans up to specified limits: Under CGFMU, micro-loans up to defined maximum amounts can be provided without requiring collateral or third-party guarantee. This lowers entry-barriers for first-time or small entrepreneurs with limited assets.
Sector coverage: Eligible enterprises can be from manufacturing, services, trading (including retail), and in many cases allied agricultural activities. This ensures that a wide variety of micro-units from a small retailer to a tiny manufacturer can access the scheme.
Guarantee coverage (typically 75%): In case of default by borrower, the guarantee covers a substantial portion (usually up to 75%) of the loan amount, mitigating risk for lenders.
Loan categories: Under related schemes like Pradhan Mantri Mudra Yojana (PMMY), loans under CGFMU are often categorised as Shishu (smallest), Kishore, Tarun; recent amendments allow an additional “Tarun Plus” category for well-performing enterprises.
Covered only through approved MLIs: For a loan to get guarantee cover, it must be extended by a recognized Member Lending Institution such as a bank, NBFC, or MFI registered under CGFMU.

Financial Assistance

Component	Assistance Provided	Detailed Explanation
Loan Facilitation (via guarantee)	Guarantee cover (typically up to 75%) on micro-loans	If you take a loan (say ₹8 lakh) from a participating bank/NBFC, CGFMU guarantees up to 75% (i.e. ₹6 lakh) of that loan against default. This helps lenders feel secure and increases the chance of loan approval.
Loan Amount Limit	Up to ₹10 lakh (or as per scheme update up to ₹20 lakh for certain cases)	For regular micro-units, loans up to ₹10 lakh are covered. Recent amendments allow guarantee cover for “Tarun Plus” micro-units or eligible Self-Help Groups (SHGs) up to ₹20 lakh.
Overdraft / PMJDY-linked small loans	Overdraft facility of ₹10,000 under certain accounts (e.g. PMJDY) may be guaranteed	This helps tiny businesses or individuals who maintain Jan Dhan / similar accounts to get small overdraft credit with guarantee protection under CGFMU .

Eligibility Criteria

Who Can Apply:

Micro enterprises requiring credit up to ₹10 lakh
Individuals, proprietors, small traders, artisans, MSME micro units
Start-ups in micro category
Units engaged in - Manufacturing, Services, Trading, Repair/maintenance activities
Borrowers applying under PMMY/MUDRA Loan

Who Cannot Apply:

Borrowers with past loan defaults or NPA history
Companies requiring credit above ₹10 lakh
Entities outside micro category
Unregistered businesses (when registration is mandatory for the activity)
Applicants already availing other guarantee-backed loans for the same purpose

Documents Required

KYC documents of proprietor / partners / directors (identity proof, address proof)
Business proof (Udyam registration or MSME registration if applicable, or business address proof, GST / trade licence / shop act registration, or any relevant business document)
Loan application form with purpose, amount, business turnover, cash flow/financials (if required)
Bank account details / bank statements
Declaration/guarantee application form (filled by lender / MLI)

Application Process for the Scheme

Option 1: Apply with Bullit (Recommended)

Click here to start with guided support. Our team verifies eligibility, compiles documents, and handles application & follow-ups on your behalf. You can monitor progress while focusing on operations.

Recommended for: Lean teams. Designed to save you time and effort. Access expert help from start to finish.

Option 2: Apply Through a Bank / MFI (Government Process)

Visit your nearest Bank, NBFC, MFI, or Cooperative Bank offering PMMY/MUDRA loans.
Fill the MUDRA Loan Application Form specific to Shishu/Kishore/Tarun.
Submit KYC, business details, and supporting documents.
Bank assesses viability and sanctions the loan.
Loan is automatically covered under CGFMU; no separate application is needed.

Option 3: Apply Through Online PMMY Portal (If available)

Visit the PMMY digital platform of your lending bank.
Submit digital application with scanned documents.
Bank reviews and processes the request.
Approved loans receive automatic CGFMU coverage.