Startups can get loans upto 10 crores without collateral security

If you are planning to start your own business whether in the form of a startup or a small business. On the same page you feel that you do not have adequate funding to run your business. This is a major problem which many entrepreneurs face. The government of India comes with some schemes in which they provide financial assistance to entrepreneurs. 

The Department for Promotion of Industry and Internal Trade (DPIIT) has announced a scheme called the credit guarantee scheme for startups or CGSS. The government of India has notified the scheme and said that the loan facility will be sanctioned to an eligible borrower after the 6th of October 2022.  

Aim of the scheme  

The main objective of the credit guarantee scheme for start-ups is to provide them with collateral-free loans up to a specified limit. The CGSS is also aimed at providing credit guarantees up to a specified limit against loans that can be extended by Member Institutions (MIs) to finance eligible borrowers.  

MIs are financial intermediaries such as all banks, financial institutions, NBFCs (Non-Banking Financial Companies), and AIFs that are engaged in lending or investing. These bodies conform to the eligibility criteria and are approved under the scheme. 

Benefits of the schemes  

• The guarantee will be offered by lending institutions, who are authorized    to conform eligibility criteria of the startups, and it must be recognized by the Department of Industrial Policy and Promotion (DIPP). 

• CGSS will offer guarantees based on portfolios wherein every included portfolio will consist of 10 or more startup loans for a fiscal year. 

• Credit guarantees of up to Rs.5 crore will be offered to every eligible startup, including assistance, including working capital, venture capital, optionally convertible debt, debentures, term loan, etc. 

• Credit can be provided with up to 75% credit which is subject to a limit of Rs.150 lakh. 

• Micro enterprises seeking loans of below Rs.5 lakh will be offered up to 85% of the requested credit amount. 

• The scheme is offering up to 80% credit can be extended to MSMEs operated or owned by women and NER (Northeastern Region) including Sikkim. 

• A guarantee covers up to 50% of the amount which is subject to a limit of Rs.50 lakh. (For MSME retail trade). 

• The loan amount will be backed with a guarantee that can be a maximum of ?10 crores per borrower and cannot exceed. It will also include the credit facility being covered here cannot be covered under any other guaranteed scheme. 

Eligibility criteria  

Firstly, you should be eligible to avail yourself of the benefits of the scheme. The eligible criteria are mentioned below. 

• The start-up should be recognized as it has reached the stage of stable revenue stream. 

• It should also be assessed from audited monthly statements for the whole financial year along with amenable to debt financing. 

• Start-ups that are not in default to any lending or investing institution are not classified as a non-performing asset as per RBI guidelines. 

It is also mentioned that there will be a Management Committee constituted by the DPIIT to overlook the affairs of the trust. 

The committee will be responsible for reviewing, supervising, and monitoring the' functioning of the trust and shall provide necessary guidance to the trust on broad policy matters related to the scheme, As the ministry said about the scheme.