The Credit Guarantee Scheme for Startups (CGSS) was launched by the Government of India to provide funding access to startups without collateral requirements. This scheme aims to address the challenges faced by startups in securing credit and loans from banks due to lack of assets or revenue history.
Launch and Administration
The CGSS scheme is administered by the Department for Promotion of Industry and Internal Trade (DPIIT) under the Ministry of Commerce and Industry. DPIIT formulates and implements industrial policies aligned with national priorities.
The scheme was announced on October 6, 2022 to provide credit guarantee on loans up to Rs 10 crores given by Member Lending Institutions (MLIs) to eligible startups. The guarantee coverage ranges from 65% to 80% based on the loan amount.
| Launch Date | October 6, 2022 |
|---|---|
| Administered By | Department for Promotion of Industry and Internal Trade |
| Maximum Loan Covered | Rs 10 crores |
Eligibility Criteria
The eligibility criteria for startups to avail loans under CGSS are:
- Should be recognized under DPIIT's startup recognition framework
- Have a positive cash flow for past 12 months shown via bank statements
- Have not defaulted on existing loans or have NPA status
In addition the lending institutions should be commercial banks included in RBI's Second Schedule of banks.
Guarantee Coverage and Validity
The credit guarantee coverage and maximum cap under CGSS are:
| Loan Amount | Guarantee Coverage |
|---|---|
| Up to Rs 3 crores | 80% of default amount |
| Above Rs 3 crores to Rs 5 crores | 75% of default amount |
| Above Rs 5 crores to Rs 10 crores | 65% of default amount |
The guarantee will be valid for up to 7 years from loan disbursement date.
Benefits of the Scheme
The key benefits of the CGSS scheme for startups are:
- Access to collateral-free loans
- Address lack of credit history issues
- Support in scaling up operations
- Expansion of product portfolio
Thus, this scheme aims to fulfil working capital needs of startups allowing them to focus on business growth.
Comparison to Other Schemes
Other key schemes supporting startups in India are:
- Startup India Seed Fund Scheme: Provides seed funding access
- SAMRIDH Scheme: Supports innovation in electronics and IT
- PM FME Scheme: Growth of micro food enterprises
The CGSS uniquely enables credit flow to startups working across sectors. The seed funding and innovation schemes have more specific target areas.
Conclusion:
The Credit Guarantee Scheme for Startups aims to empower startups to scale their innovative solutions for sustainable economic growth. By supporting access to credit and working capital, thousands of enterprising startup teams across India can turn their aspiring ideas into thriving businesses.
FAQ:
Q1: What is the maximum loan amount covered under CGSS?
A1: The maximum loan amount eligible for guarantee under CGSS is Rs 10 crores.
Q2: What is the guarantee coverage for loans above Rs 3 crores?
A2: For loans above Rs 3 crores up to Rs 5 crores, the guarantee coverage is 75%. And for loans above Rs 5 crores to Rs 10 crores, it is 65%.
Q3: Which department administers the CGSS scheme?
A3: The Department for Promotion of Industry and Internal Trade (DPIIT) under the Ministry of Commerce and Industry administers CGSS.
Q4: Which lending institutions can provide loans under CGSS?
A4: Scheduled Commercial Banks included in RBI's Second Schedule of Banks can provide loans under this scheme.
Q5: Can startups having existing loans apply under CGSS?
A5: Yes, startups that do not have a default status on existing loans can apply and avail benefits under CGSS.
Q6: What is the validity period of CGSS guarantees?
A6: The guarantees are valid for up to 7 years from the loan disbursement date.
