Startup Funding Boost: Revised Credit Guarantee Scheme

New Delhi, May 9 (PTI) The revised credit guarantee scheme for startups will further reduce the perceived risks of lending to them, enabling greater financial support to undertake research and development, and creating cutting-edge technologies, an official statement said on Friday.

The government on Thursday approved a revised Credit Guarantee Scheme for Startups (CGSS), which increases the ceiling on guarantee cover per borrower from Rs 10 crore to Rs 20 crore.

The broad objective of CGSS is to provide guarantee up to a specified limit against credit instruments extended by member institutions to finance eligible startups.

This scheme would help provide the much needed collateral-free debt funding to startups.

"The expanded scheme will further reduce the perceived risks associated with lending to startups in established financial institutions, enabling greater financial flow and runway for startups to undertake R&D, experimentation, and create cutting-edge innovation and technologies," Department for Promotion of Industry and Internal Trade (DPIIT) said.

It also said the extent of guarantee cover has been increased to 85 per cent for loans up to Rs 10 crore and 75 per cent for loans above that.

The Startup India initiative along with an action plan for them was launched on January 16, 2016 to create a vibrant ecosystem for these entities in the country.

Under the plan, the government had rolled out the CGSS on October 6, 2022 to provide guarantee up to a specified limit against credit instruments extended to startups by Scheduled Commercial Banks, All India Financial Institutions (AIFI), Non-Banking Financial Companies and Securities and Exchange Board of India (SEBI) registered Alternative Investment Funds (AIFs).

The broad objective is to finance eligible startups, by enabling collateral- free debt funding to startups through avenues such as working capital, term loans, and venture debt.

The Union Budget 2025-26 had proposed the enhancement of credit availability with guarantee cover for startups.

Over 1.61 lakh entities have been recognised as startups by the government as of January this year.