Credit Guarantee Scheme for Startups

Introduction

• After US and China, India stands as the third largest hub for startup globally.
• According to the DPIIT, there are currently 123,073 DPIIT recognised startup operational in India.
• Remarkably, around 48% of these startups are from Tier 2 and Tier 3 cities.
• However, despite the burgeoning startups ecosystem, many start-ups failed to sustained because of the financial crunch.
• Recognising this issue, the government has taken some proactive steps to support the startup body.
• In view to, the government announced the Credit Guarantee Scheme for Startups in 2022.
• Under this scheme, the beneficiary will get a credit guarantee up to specified limit against the loan issued by the Scheduled Banks, NBFCs etc.
• Along with this, they will get a collateral free credit or loan from the institutions.
• For individuals, the maximum guarantee is capped at 10 Cr or the actual credit amount, whichever is less.
• The guarantee offering under the scheme would be transaction based and umbrella based.
• On a single borrower basis, the Transaction Based Guarantee is provided to Member of Institution (As of 2024, there are 31 registered MIs).
• Whereas, Umbrella Based Guarantee offers guarantee to Venture Based Funds (VDF) registered under the AIF Regulation of SEBI.

Benefits of Scheme

• The foremost benefit of the Credit Guarantee Scheme for Startups (CGSS) is they are offering Credit guarantee against your loan.
• Secondly, beneficiary will get a collateral free credit or loan from the MIs.
• Individual will receive a maximum credit guarantee of Rs 10 Cr or their actual outstanding credit amount, whichever is lower.
• Guarantee offers under the CGSS is transaction based or Umbrella Based.

Eligibility Criteria

• To borrow Credit Guarantee under the CGSS have some specific criteria for startups, that are as follows:
  • Startups must be registered and recognised by the DPIIT.
    • For this, the company age or its operation should not exceed 10 years.
    • Company must be incorporated as a Private limited or Registered partnership firm or Limited Liability Partnership.
    • Since Inception, the Annual turnover of the company should not exceed Rs 100 Cr.
    • Innovation and scalability are two prime aspects of the company which may generate wealth and employment.
    • Ensure the company should not have any connection to splitting or reconstruction of any existing business.
  • As per the RBI Guidelines, Startups must not be defaulted by any institution and labelled as Non Performing Asset.
  • The Member of Institution certifies the eligibility for guarantee cover of the startup.
  • Must have generated a stable revenue over the last 12 months.
  • Scheduled bank and NBFCs must have a rating of BBB and above.

Documents Required

• Applicants must submit the documents in support of their Credit Guarantee Scheme for Startups application as required by the Member of Institution.
  • PAN Card
  • Company Registration Certificate
  • Revenue Details
  • Voter ID
  • Aadhaar Card
  • Passport Size Photograph
  • Residence Proof
  • Company Address Proof
  • DIPP Recognition Certificate
  • As required by the Member of Institution.

How to apply

• As the Guarantee is offered by the Registered MIs to eligible startups that are recognised by the DIPP.
• If your startup is not DIPP recognised then you have to recognised it first.
• For that, you have to create an investor account, if you don't have already.
• You can create your investor account by visiting the National Single Window System Website.
• Post Registration, login to the portal with the generated details.
• Thereafter, you can fill the 'Registration as a Startup' Application form with the required details.
• Once your startup get recognition on DIPP, then you can apply for a credit or loan offline from the Member of Institution that are on the NCGTC panel.
• As of 16 Feb, 2024, there are 31 MIs registered whose details are given as

Important Link

• Startups India Website
• Credit Guarantee Scheme for Startups Investor Registration
• Credit Guarantee Scheme for Startups Investor Login
• Credit Guarantee Scheme for Startups DIPP Recognition Certificate

Contact Details

• Credit Guarantee Scheme for Startups Helpline: 1-800-115-565
• Credit Guarantee Scheme for Startups Helpdesk: startup@ncgtc.in
• INVEST INDIA, 110, Vigyan Bhavan Annexe, 001, Maulana Azad Road, New Delhi 110 001