The Government of India started in 2024 the Credit Guarantee Scheme for Startups (CGSS) to give young businesses easier access to funding. Managed by the Department for Promotion of Industry and Internal Trade (DPIIT), the scheme allows startups to secure loans without collateral or third-party guarantees. This move is part of the government’s broader vision to encourage innovation, nurture entrepreneurship, and strengthen economic growth.
Making Credit Easier for Startups
Banks and financial institutions often consider startups risky borrowers, which limits their chances of getting loans. The updated CGSS removes this hurdle by offering collateral-free financing. With credit guarantees in place, lenders are more confident in extending loans, and startups gain smoother access to capital. This helps new ventures focus on building innovative solutions instead of worrying about financial roadblocks.
Key Benefits of the Scheme
The revamped CGSS offers multiple features that directly support entrepreneurs:
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Collateral-Free Loans – Startups no longer need assets or third-party guarantees to access funds.
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Increased Credit Access – Lenders can provide more loans thanks to government-backed guarantees.
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Lower Risk for Lenders – The scheme absorbs part of the risk, making lending to startups more attractive.
Financial Coverage Details
The enhanced plan lays out structured financial support to cover diverse business needs:
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Loan Default Coverage – 80% coverage for defaults up to ₹3 crores, 75% for defaults between ₹3–5 crores, and 65% for loans above ₹5 crores (up to ₹10 crores per borrower).
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Startup India Recognition – Startups registered under DPIIT can secure collateral-free loans of up to ₹5 crores, including funding via venture capital, cash flow, bonds, or long-term debt.
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Women and MSME Support – Women-led ventures and MSMEs in the North-East (including Sikkim) can get up to 80% coverage. Retail MSMEs are eligible for 50% guarantee on loans up to ₹50 lakhs.
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Microbusiness Loans – Small ventures borrowing less than ₹5 lakhs enjoy 85% loan coverage.
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Guarantee Fees – A nominal 1% annual fee applies, with concessions for women-led businesses, microbusinesses, and North-East units.
Role in India’s Startup Growth
The CGSS is a vital part of Startup India, the flagship program launched in 2016 to empower entrepreneurs. By June 30, 2024, India had recognized over 1.4 lakh startups, a testament to the country’s growing entrepreneurial spirit.
With these new reforms, the CGSS is expected to accelerate startup funding, reduce financial stress, and create a more supportive lending environment. This will not only fuel innovation but also position India as a global hub for entrepreneurship.
Also Read: PMVBRY 2025: How to Get ₹15,000 Incentive for First Job Under Pradhan Mantri Rozgar Scheme
