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The Indian government has revised the credit guarantee scheme for startups that will further reduce the perceived risks of lending to them, enabling greater financial support to undertake research and development, and creating cutting-edge technologies.
The government approved a revised Credit Guarantee Scheme for Startups (CGSS), which increases the ceiling on guarantee cover per borrower from Rs 10 crore to Rs 20 crore.
The broad objective of CGSS is to provide guarantee up to a specified limit against credit instruments extended by member institutions to finance eligible startups. This scheme would help provide the much needed collateral-free debt funding to startups.
As per the scheme, the extent of guarantee cover has been increased to 85% for loans up to Rs 10 crore and 75% for loans above that. The objective is to finance eligible startups, by enabling collateral-free debt funding to startups through avenues such as working capital, term loans, and venture debt.
Under the plan, the government had introduced the CGSS on October 6, 2022 to provide guarantee up to a specified limit against credit instruments extended to startups by Scheduled Commercial Banks, All India Financial Institutions (AIFI), Non-Banking Financial Companies and Securities and Exchange Board of India (SEBI) registered Alternative Investment Funds (AIFs).
The Union Budget 2025-26 had proposed the enhancement of credit availability with guarantee cover for startups. Over 1.61 lakh entities have been recognised as startups by the government as of January this year.
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