For any business venture to flourish, the most important requirement is capital i.e. timely availability of funds. When businesses lack proper funding their growth cycle is disrupted. This is a major hindrance for a vast majority of entrepreneurs. Some are totally unable to start their business while some start their businesses but face a financial crunch after a short period of time. Moreover, nowadays  it has become difficult for entrepreneurs to obtain loans from banks due to a variety of factors.

The start-up sector, most recently, received a much-needed push from the Government of India with the formulation of the Credit Guarantee Scheme for Startups or Credit Guarantee Fund Scheme or CGSS with a contribution of Rs. 2,000 crores. The scheme is a part of the  initiative - Startup India action plan and will therefore allow startups to avail loans for their business with no collateral.

Know more about the Credit Guarantee Scheme for Startups (CGSS), what this scheme is about, the highlights, fees structure, guarantee period, and how it will benefit business owners in India.

Highlights of Credit Guarantee Scheme for Startups 

  • The startup has to be recognised by the Department of Industrial Policy and Promotion (DIPP) in order to be eligible for the credit guarantee.
  • The scheme shall 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 such as working capital, term loans, venture capital, debentures, optionally convertible debt etc.
  • Under the Credit Guarantee Scheme, the loan offered for a startup is up to Rs. 5 crores to any eligible startup.
  • The scheme coverage offered 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 Lakhs.
    b. Where loans of less than Rs. 5 Lakhs 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 North-East Region(NER) which includes 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 Lakhs.

Pre-requisites of Credit Guarantee Scheme for Startups

  • The lending institutions that are members under this scheme may be scheduled commercial banks/financial institutions or NDFCs registered with the RBI or Alternate Investment Funds (AIFs).
  • MLIs will offer guarantee funds of up to Rs. 500 lakhs to eligible startups, without requiring any security or third party guarantee.
  • Aadhaar will be compulsory for all resident partners or directors, while the passport number will be mandatory for non-resident partners or directors for the KYC purpose.
  • As per the terms of the trusteeship management of the National Credit Guarantee Trust Company (NCGTC) CGSS will function.
  • Conflicts of interest will be subjected and taken up by the Risk Evaluation Committee (REC) that was formed for this purpose.
  • This Credit Guarantee Scheme for MSME will be controlled and managed by a Management Committee (MS).

Eligibility Criteria for Borrowers and Lending Institutions under CGSS


  • All existing and new Small and Medium Enterprises

Lending Institutions

  • Scheduled commercial banks (Public Sector Banks/Private Sector Banks/Foreign Banks)
  • Select Regional Rural Banks (which have been classified under 'Sustainable Viable' category by NABARD)

Certain other banking/financial institutions are deemed as chosen by the Govt. of India as per set criteria. These include:

  • National Small Industries Corporation (NSIC)
  • Andhra Pradesh State Financial Corporation
  • Jammu & Kashmir Development Finance Corporation Ltd
  • Kerala Financial Corporation
  • Tamil Nadu Industrial Investment Corporation Ltd.
  • Delhi Financial Corporation
  • Export Import Bank of India
  • Small Industries Development Bank of India (SIDBI)
  • North Eastern Development Finance Corporation (NEDFI)

Guarantee Fee under CGSS



Composite Annual General Fee

1% of the credit amount p.a.

Guarantee Fee for credit amounts up to Rs. 5 Lakhs


Guarantee Fee for credit amounts over Rs. 5 Lakhs and below Rs. 100 Lakhs*


*This will be charged from women-owned enterprises, micro enterprises and NER units for all cities including Sikkim.

Guarantee Period under CGSS

The guarantee cover under the credit guarantee scheme for startups will be provided for the period agreed on for the credit facility. Guarantee cover will be provided for a whole of 5 years for the working capital. A GST rate of 18% is applicable on banking services and products from 01 July, 2017.


This article gives you all that you need to know about the Credit Guarantee Scheme for Startups in India. Loans without collaterals is a huge boon for entrepreneurs. As the main struggle for potential entrepreneurs is capital, proper funding can pave the way for them to flourish and turn the dream of ‘Make in India’ vision into reality. 

As more entrepreneurs turn their vision into reality the more employment opportunities and thus the greater the economy. Eligible startups can apply for the scheme and make use of the opportunity provided for them.