The Credit Guarantee Scheme for Startups (CGSS)

The Credit Guarantee Scheme for Startups (CGSS) is aimed at providing credit guarantee up to a specified limit against loans extended by Member Institutions (MIs) to finance eligible borrowers viz. Startups as defined in the Gazette Notification issued by the Department for Promotion of Industry and Internal Trade (DPIIT) and amended from time to time.

Overview

The Government of India established the Credit Guarantee Scheme for Startups with a fixed corpus for providing credit guarantees to loans extended to DPIIT recognised startups by Scheduled Commercial Banks, Non-Banking Financial Companies (NBFCs) and Venture Debt Funds (VDFs) under SEBI registered Alternative Investment Funds. The revised framework has enhanced guarantee coverage, increasing the maximum limit from INR.10.00 crores to INR.20.00 crores per eligible borrower.

CGSS does not provide guarantee cover to DPIIT recognised startups directly, but through a Trustee (NCGTC), which in turn provides guarantee cover to MIs who provide loans to startups. The instruments of assistance would be in the form of Venture debt, working capital, subordinated debt/mezzanine debt, debentures, optionally convertible debt and other fund-based as well as non-fund-based facilities, which have crystallised as debt obligations. Credit guarantee coverage under this model would be either transaction-based or umbrella-based.

Borrower Eligibility

Startup as recognized by DPIIT as per Gazette Notifications issued from time to time, and
Startup not in default to any lending/investing institution and not classified as Non-Performing Asset as per RBI guidelines, and
Startup whose eligibility is certified by the Member Institution for the purpose of guarantee cover.

Benefits to startups

Facilities / loans without collateral.
Much easier approval as compared to traditional facilities.

Visible impacts on startups

CGSS acts as a bridging the gap between startups and its ambitious growth opportunities. Most of the startups have future proof product / service but lacks scaling as expected due to shortage of funds. Funds can be applied for: