₹20 Crore Startup Credit Shield: To help startups secure loans with reduced collateral demands, the government has rolled out the Credit Guarantee Scheme for Startups (CGSS). The scheme extends a government-backed credit guarantee on loans issued to startups recognized by DPIIT.
Notably, startups don’t receive this guarantee directly. The National Credit Guarantee Trustee Company (NCGTC) instead channels it to the lenders themselves, which include banks, NBFCs, and SEBI-registered alternative investment funds (AIFs).
How much loan amount is covered by the guarantee A startup can get guarantee cover on loans up to a maximum of ₹20 crore. This limit was previously ₹10 crore.
Which startups can benefit? Only those recognized by DPIIT are eligible. The startup must not be a defaulter with any bank or investment institution. It must also not have been declared a Non-Performing Asset (NPA) under RBI rules. Eligibility for the guarantee will be confirmed by the relevant member institution.
What is umbrella-based guarantee Under this, the Trust provides guarantee cover equal to either the actual loss or 5% of the investment made in the startup whichever is lower. This is also capped at ₹20 crore per startup. This cover remains valid for the entire tenure of the venture debt fund.
₹20 Crore Startup Credit Shield: How to apply Applications can be made online through the Jan Samarth portal. Applications can also be made through member institutions associated with the scheme. Information about the offline process can be obtained from the nearest branch of a member institution.
How much guarantee cover is available Under transaction-based guarantee, loans up to ₹10 crore get 85% coverage of the default amount, while loans above ₹10 crore get up to 75% coverage of the default amount. The guarantee limit is ₹20 crore per startup.
Which institutions can provide loans Scheduled commercial banks and financial institutions, RBI-registered NBFCs, and SEBI-registered Alternative Investment Funds are eligible. NBFCs must have a rating of BBB or above and a minimum net worth of ₹100 crore.
What kind of loans are available These include venture debt, working capital, subordinated debt, mezzanine debt, debentures, and optionally convertible debt facilities. Other capital, fund-based, and non-fund-based facilities may also be available.
How is the guarantee issued First, the startup approaches a member institution for a loan. The institution assesses the project’s feasibility and the startup’s eligibility. Once the loan is approved, the institution applies for guarantee cover on the NCGTC portal. The guarantee cover is issued once all conditions are met.
What’s the biggest benefit of this scheme: It can help startups obtain loans without having to pledge assets as collateral. This can make it easier to raise funds for expanding business, arranging working capital, and working on new plans.