The Credit Guarantee Scheme for Startups has been formally announced by the Department for the Promotion of Industry and Internal Trade (DPIIT) (CGSS). Let us understand all the latest updates related to the latest credit guarantee scheme for startups through this article.
What is the purpose of the Credit Guarantee Scheme for Startups?
The purpose of CGSS is to back loans made by Member Institutions (MIs) to qualified borrowers up to a certain cap. Entrepreneurial initiatives meeting the criteria outlined in the DPI IT’s Gazette Notification, as updated from time to time. The Scheme’s credit guarantee coverage would be both transaction- and umbrella-based. Any one case’s exposure would be restricted at Rs. 10 crore, or the actual overdue credit amount, whichever is smaller.
Benefits of Credit Guarantee Scheme for Startups
- The scheme’s credit guarantee coverage would be both transaction- and umbrella-based.
- Any one case’s exposure would be restricted at Rs. 10 crore, or the actual overdue credit amount, whichever is smaller.
- Scheduled Commercial Banks, Non-Banking Financial Companies, and Alternative Investment Funds registered with the Securities and Exchange Board of India (SEBI) would be able to access credit guarantees under this program (AIFs).
Important Information to know about CGSS
Regarding transaction-based guarantee cover, the guarantee cover received by the MIs is on a single eligible borrower basis. Banks and NBFCs will be more likely to lend to qualified startups if they have access to transaction-based guarantees. For loan amounts up to Rs. 3 crore, transaction-based cover will be 80% of the amount in default; for loan amounts between Rs. 3 and Rs. 5 crore, cover will be 75% of the amount in default; and for loan amounts greater than Rs. 5 crore, cover will be 65% of the amount in default (up to Rs. 10 crore per borrower).
Conclusion
In Conclusion, DPIIT-recognized start-ups and MSMEs having MSME Registration will be able to access more capital as they work toward becoming fully functional businesses thanks to a credit guarantee programme specifically designed for them. The initiative is another example of the government’s dedication to making India’s start-up scene the finest in the world by encouraging innovation and entrepreneurship.
CGSS will supplement the Funds for Startups and the Startup India Seed Fund Scheme is already in place as part of the Startup India Scheme, with the goal of mobilizing domestic finance for Indian start-ups.
Moreover, you require any kind of guidance related to the MSME Registration, please feel free to contact our business advisors at 8881-069-069.
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