Credit Guarantee Scheme for Startups Online Application PDF Form Download, Benefits & Eligibility | CGSS Scheme Apply Online Implementation Strategy, Startups List
The government of India has taken a new initiative to support the Startup industry. The Prime Minister of India launched a Credit Guarantee Fund Scheme that will help Startups to get collateral-free loans for starting businesses. The special scheme also known as the Credit Guarantee Scheme will provide credit guarantees to loans extended by Scheduled Commercial Banks, Non-Banking Financial Companies, and Securities and Exchange Board of India (SEBI) registered Alternative Investment Funds (AIFs). According to the scheme, the lending institutions will offer a guarantee to qualified startups.
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Credit Guarantee Scheme for Startups Launched
A startup is always difficult to work for any entrepreneur. They have to face many issues like lack of adequate funding etc. So, to support this startup sector the government decided to launch the Credit Guarantee Scheme for Startups. As per the Department for Promotion of Industry and Internal Trade (DPIIT), those loan/debt facilities that are sanctioned on or after October 6 can take advantage of this scheme. With the help of the scheme, the startups will be able to get the funding that is must be required for them. According to the department, the maximum guarantee cover should not be more than Rs 10 crore.
A management committee and a risk evaluation committee will be made to review and supervise the scheme. The new scheme will be operated by the National Credit Guarantee Trustee Company Limited (NCGTC). The committee will also help in providing guidance about broad policy matters related to the scheme.
Highlights of Credit Guarantee Scheme for Startups (CGSS)
- Credit Guarantee Scheme for Startups (CGSS) will be offering guarantees based on portfolios.
- Each portfolio will have 10 or more startup loans for a financial year.
- Under the scheme, every eligible entrepreneur will be getting Credit guarantees of up to Rs.5 crore.
- They will also be provided with assistance like working capital, venture capital, optionally convertible debt, debentures, term loans, etc.
- A credit of up to 75% credit, subject to a limit of Rs.150 lakh will also be offered in this scheme.
- Micro enterprises who are looking for loans under Rs.5 lakh will be given up to 85% of the requested credit amount.
- MSME retail trade will be getting a guaranteed cover of up to 50% of the amount, subject to a limit of Rs.50 lakh.
Pre-requisites of CGSS
- For KYC, Aadhaar will be needed for all resident partners or directors.
- A passport number will be compulsory for non-resident partners or directors.
- CGSS is going to work according to the terms of the trusteeship management of the National Credit Guarantee Trust Company (NCGTC).
- The eligible startups will be getting guarantee amounts of up to Rs.500 lakh and there is no need for a third-party guarantee or security.
- These guarantee amounts will be offered by member lending institutions.
- The Risk Evaluation Committee (REC) will keep an eye on the Conflicts of interest.
Eligible Lending Institutions under CGSS
- Scheduled commercial banks – Public sector banks, private sector banks, and foreign banks.
- Certain Regional Rural Banks categorized as ‘Sustainable Viable’ by NABARD
- Certain other financial institutions are deemed as chosen by the Govt. of India as per set criteria. These include:
- Small Industries Development Bank of India (SIDBI)
- Delhi Financial Corporation
- North Eastern Development Finance Corporation (NEDFI)
- Kerala Financial Corporation
- National Small Industries Corporation (NSIC)
- Jammu & Kashmir Development Finance Corporation Ltd
- Tamil Nadu Industrial Investment Corporation Ltd.
- Export-Import Bank of India
- Andhra Pradesh State Financial Corporation
Guarantee Fee under CGSS
A composite Annual Guarantee Fee, of 1.0 % p.a. of the credit amount provided, will be charged. A Guarantee Fee of 0.75% will be charged for credit amounts of up to Rs.5 lakh, and 0.85% for credit amounts over Rs.5 lakh and below Rs.100 lakh, will be charged from women-owned enterprises, micro-enterprises, and NER units (including Sikkim).
Guarantee Period under CGSS
The guarantee cover will be offered for the period agreed upon for the credit facility. Guarantee cover is offered for a block of 5 years for working capital.
The scheme will help in offering financial assistance to startups. The issue of the unavailability of the collateral-free loan will be considered. This is one step towards making the Indian startup ecosystem the best in the world.