Karnataka State Collateral Security Guarantee Fund Scheme for Micro, Small and Medium Enterprises

The Karnataka State Collateral Security Guarantee Fund Scheme for Micro, Small & Medium Enterprises is a state-level initiative by the Government of Karnataka, implemented through the Karnataka State Financial Corporation , intended to provide guarantee cover on collateral security for eligible MSME units. The scheme aims to facilitate access to finance by reducing the collateral burden for micro, small and medium enterprises operating in Karnataka.

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

Key Features

Guarantee cover for collateral security: The scheme allows eligible MSME borrowers to obtain bank or financial institution loans backed by KSFC’s guarantee of the collateral security component, thereby reducing the upfront security requirement from the borrower.
Encouragement of SC/ST entrepreneurs: The scheme explicitly mentions focus on Scheduled Caste / Scheduled Tribe (SC/ST) category entrepreneurs for guarantee cover under this fund.
Facilitates easier credit access: By reducing the collateral burden, the scheme promotes improved access to institutional finance for new or expanding MSME units, thereby supporting growth, investment and employment generation.
Risk sharing: The guarantee mechanism fosters greater willingness among lending institutions to finance MSMEs with lower collateral coverage, thus bridging credit gaps.
State-level coverage: Since it is a Karnataka-state scheme, it is better aligned with state industrial policy, local MSME ecosystem and regional banks/financial institutions, making application and implementation more accessible for enterprises in Karnataka.

Financial Assistance

Component	Assistance Provided	Detailed Explanation
Guarantee Cover	The scheme provides a guarantee for credit facilities extended to eligible MSME units.	Example: Suppose your MSME takes a bank loan of ₹ 50 lakh under this scheme; the guarantee fund may cover x% of that loan amount (exact % needs confirmation). This reduces bank’s risk and increases your chance of approval.
Reduced Collateral Requirement	Because of the guarantee, the need for full collateral security is reduced.	Example: If normally a bank would ask for immovable property worth twice the loan amount, under this scheme you might be required to provide lower value or partial collateral, making access easier.
Defined Guarantee Duration	Guarantee cover is valid for a specific maximum period .	Example: If your loan tenure is 6 years, the guarantee cover may remain valid for those 6 years . This gives clarity on when the backing ends.

Eligibility Criteria

Who Can Apply:

Micro, small and medium enterprises located in the State of Karnataka.
Borrowers must be SC/ST entrepreneurs (100 % ownership) under the specific SC/ST version of the scheme.
Loans must be sanctioned by scheduled banks or financial institutions for MSME purposes and be eligible for guarantee cover under the scheme.

Who Cannot Apply:

Enterprises outside Karnataka.
Enterprises not classified as MSME under the relevant definitions.
Borrowers who have previously defaulted on loans or are non-performing assets at the time of application .
Units not SC/ST owned in the specific version of the scheme targeted to SC/ST beneficiaries.
Loans which are ineligible under scheme guidelines .

Documents Required

Valid Udyam / MSME registration certificate for the enterprise.
Proof of SC/ST ownership (in case of SC/ST version) – caste certificate.
Proposed project report/loan utilisation plan detailing purpose and quantum of loan.
Bank loan sanction letter/term sheet .
Financial statements or projections .
Identity proof and address proof of promoters.
Collateral asset details though guarantee reduces the security burden.
Other documents as required by the bank or KSFC as per scheme circulars.

Application Process for the Scheme

Option 1: Apply with Bullit

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Option 2: Via KSFC / Lending Institution

Approach a bank or financial institution recognised by the scheme in Karnataka.
Submit the loan application and mention that you wish to avail guarantee cover under the Collateral Security Guarantee Fund Scheme.
The bank will forward required documents to KSFC for approval of guarantee cover of the collateral security component.
Upon KSFC’s approval of guarantee, loan is sanctioned to the MSME and the collateral required is reduced in accordance with guarantee terms.
After disbursement the unit commences operations; in case of default the guarantee mechanism operates as per scheme terms.

Option 3: Through District-level MSME/Industry Department Facilitation

Reach out to your District Industries Centre or MSME Development Institute in Karnataka.
They can provide guidance, help identify eligible institutions and assist in pre-application review of your business/project.
Complete the documentation and verify with KSFC/Bank for guarantee cover.
(This is supplementary to the bank/KSFC route.)