Names and identifying details in this case study have been changed. The structure, the numbers and the sequence are as they happened.
The requirement
A fabrication unit operating from a rented shed had been awarded a repeat contract that required it to hold more material and carry a longer payment cycle. It needed about ₹2 crore of working capital. The promoters owned no commercial property, and the family home was already mortgaged for a housing loan.
Two lenders had declined at the enquiry stage, before any file was assessed, on the single ground that there was no collateral.
Why the guarantee route applied
The CGTMSE scheme exists precisely for a viable micro or small enterprise that cannot pledge security. The Trust guarantees a large share of the facility, which allows the bank to lend against the business rather than against property.
What it does not do is remove the credit assessment. The bank still has to be satisfied that the business can service the borrowing — and that is where most files fail, not on the guarantee.
What we structured
- A ₹2 crore composite facility — a working-capital limit with a small term component for equipment — placed with a bank that writes CGTMSE cases regularly rather than reluctantly
- The file built around the contract: the award letter, the schedule, the historical payment record of the same buyer
- Udyam registration and the enterprise classification checked and in order before submission, because a mismatch there stops the file dead
- The guarantee fee and annual service fee shown to the borrower in the total cost from the outset, not discovered at sanction
The outcome
Sanctioned in about five weeks. The unit took the contract, and the same buyer has since increased the order.
What this case shows
Being declined for want of collateral is not the same as being unfundable. It usually means the enquiry reached a lender or a product that was never going to work, and no amount of persistence with that lender would have changed it.
It also shows why total cost matters. A CGTMSE facility carries a guarantee fee on top of interest, so it should be compared on the full cost — which is still, for a business with no security, very often the best available option.