This content originally appeared on DEV Community and was authored by Gov01
If you’ve ever worked with or built tools for MSMEs in India, you probably know the challenge: access to credit is a serious barrier, especially when the business needs to scale with equipment or technology.
In many cases, even successful micro and small enterprises get turned away from lenders—not because their idea isn’t viable, but because they lack collateral. That’s where the Mutual Credit Guarantee Scheme for MSMEs (MCGS-MSME) steps in with a refreshingly practical approach.
Launched by the Ministry of Finance and managed by NCGTC (National Credit Guarantee Trustee Company Ltd.), the scheme encourages lending by guaranteeing 60% of the loan amount to the lender in case of default.
It’s not a subsidy. It’s a risk-sharing model that reduces friction in getting loans approved.
How It Works
Here’s a simplified breakdown of what the scheme offers:
Loan type: Term loans only (for equipment/machinery—not working capital)
Loan limit: Up to ₹100 crore per borrower
**Guarantee cover: **60% of the amount in default
Eligibility:
- MSME must have a valid Udyam Registration Number
- Project cost should be at least 75% equipment-based
- Business must not be classified as a Non-Performing Asset (NPA)
Repayment: Up to 8 years with up to 2 years moratorium
Guarantee fee:
- 0% in Year 1
- 1.5% per annum for next 3 years
- 1% annually thereafter
Collateral: Only the asset being funded (e.g., equipment)
This approach allows MSMEs to use the machinery they’re buying as the security—not unrelated land or personal assets.
While the scheme targets traditional industries (manufacturing, repair units, agro-processing, etc.), it’s also highly relevant for product builders, automation tool vendors, and SaaS platforms working with MSMEs.
If you:
- Build ERP, POS, or CRM systems for MSMEs
- Work in embedded systems or IoT for industrial automation
- Support clients in setting up equipment-heavy businesses
… then this scheme can be a strategic discussion point. It gives your client or partner the financial backing to implement systems you help design.
It’s also a practical funding route for hardware startups and tech-enabled workshops who invest in CNC machines, 3D printers, or advanced production tools.
One Last Thing
This scheme is available for a limited time: 4 years from launch or until ₹7 lakh crore in guarantees have been issued. If you’re advising a business—or running one—it’s worth a closer look.
You can find official details on the government’s site here:
MCGS-MSME at NCGTC
If we’re serious about enabling MSMEs to adopt better tools, smarter systems, and meaningful scale,
-sharing like this is the kind of infrastructure that helps make it happen.
This content originally appeared on DEV Community and was authored by Gov01