Loan Eligibility Criteria: Revised Credit Guarantee Scheme Explained

An MSME that needs financing for its machinery purchase, production expansion, and export promotion does not just ask itself, “Am I able to get a loan?” but more importantly, “Am I qualified to get an MSME loan?”

In order to facilitate the availability of credit for qualified MSMEs, especially for those engaged in projects involving plants and machinery, the MCGS-MSME of the government has been modified. These modifications not only include bringing service sector MSMEs under the MCGS-MSME program but also decrease the machinery/equipment component in project cost to 60% from 75%.

What Changes for MSMEs?

As per the new scheme, eligible MSMEs can get credit facilities up to ₹100 crores for machinery and equipment. The new scheme gives 60% guarantee cover to lenders. The earlier provision of 5% of the upfront contribution has become refundable, subject to a good repayment record of the loan.

Now service sector MSMEs are also eligible. The percentage of machinery and equipment needed for projects has been lowered from 70% to 60%. In the case of exporters, special provisions have been made in the form of a guaranteed loan limit of ₹20 crore.

Where Does Your Credit Profile Stand?

Just because of a scheme-backed loan, it doesn’t imply that companies need not be bothered about their own credit record. A credit score check will help business owners learn about their own credit status before reaching out to the lenders.

Our team at PrimeScore have analyzed that a free credit score report can also highlight any problems that may need addressing. If you have been monitoring your paisabazaar credit score or cibil score/experian credit score, compare it carefully instead of just relying on the score itself.

If the Business Has No Credit Score?

Some startups might attempt looking for a loan without credit score when regular lending does not seem feasible to them. However, a lack of credit score and poor credit score do not always equate to each other.

One should analyze his/her borrowing and payment histories along with the information about the business before making the application. A credit score check free may serve as a way to start, and credit report analysis will give more insight.

The modified scheme is all about increasing access to useful business credit, and not about lending without considering repayment possibilities.

FAQs

1. Does the revised scheme cover service MSMEs?
   Yes, service-sector MSMEs are now included.

2. What can the guaranteed credit finance?
   Eligible plant, machinery and equipment purchases.

3. Is a credit score still relevant?
   Yes. Lenders still assess the borrower's overall creditworthiness.

4. Can businesses without credit history apply?
   Eligibility depends on the scheme and lender requirements.

5. Should an MSME check its credit profile first?
   Yes. It can help identify issues before a loan application.