Credit Guarantee Scheme For Startups

Budget 2025 Updates:

• Revision of classification of MSMEs to include more businesses and companies under the purview of MSMEs.
• Micro-enterprises on the Udyam portal will get credit cards with a Rs. 5 lakh limit; 10 lakh cards will be issued in the first year.
• A new Rs. 10,000 crore Fund of Funds will be launched with an expanded scope.
• A scheme for 5 lakh women and SC/ST first-time entrepreneurs will offer term loans up to ₹2 crore over five years, along with online capacity building.

Capital is crucial for any business, and lack of funds often hinders aspiring entrepreneurs. Many start businesses but struggle with a funding shortage soon after. Additionally, securing bank loans has become more difficult.

Recently, the Government of India introduced the Credit Guarantee Scheme for Startups under the Startup India action plan, with Rs. 2,000 crore allocated. This scheme enables startups to access loans without needing collateral.

Features of the Credit Guarantee Scheme for Startups

• The startup has to be recognised by the DIPP (Department of Industrial Policy and Promotion) in order to be eligible for the credit guarantee.
• The guarantees will be offered based on portfolios, and these portfolios will consist of at least 10 startup loans for a particular financial year.
• The credit guarantee offered will be inclusive of any other assistance (Venture capital, working capital, debentures, optionally convertible debt, term loans etc.) and will be offered up to the amount of Rs. 5 crore to every eligible startup.
• The coverage offered by the scheme is as follows – a. The scheme will be providing credit to cover up to 75% of the credit facility subject to a ceiling of Rs. 150 lakh. b. Where loans of less than Rs. 5 lakh are granted to micro-enterprises, the scheme covers upto 85% of the credit facility. c. MSMEs operated or owned by women and all loans granted to NER (North-East Region) including Sikkim will have up to 80% of the credit facility covered by this scheme. d. 50% of the amount of credit for MSME retail trade will be covered under this scheme, subject to a ceiling of Rs. 50 lakh.

Pre-requisites of CGSS

• To fulfil the KYC norms – a. For all resident partners or directors – Aadhaar is compulsory. b. For all non-resident partners or directors – passport number.
• The management of the National Credit Guarantee Trust Company will oversee the functioning of the scheme and set the terms and rules for its functioning as it sees fit.
• For the startups that are eligible under this scheme, the member lending institutions will offer a guarantee of up to Rs. 500 lakh. There is no need for any collateral security.
• A Management Committee shall be formed in order to oversee and monitor the Credit Guarantee Scheme for MSMEs.
• A Risk Evaluation Committee shall be formed so as to take up and address any conflicts of interest that may arise in any given case.

Member Lending Institutions

The list for Member Lending Institutions stands at 144 currently. This includes:-

• Public Sector Banks
• Private Sector Banks
• Regional Rural Banks
• Foreign/MNC Banks
• Non-Banking Financial Institutions
• Lending Institutions
• Small Finance Banks
• Scheduled Urban Co-operative Banks

The Regional Rural Banks have to be categorised as ‘Sustainable Viable’ by NABARD.

Fees Under CGSS