Government approves revised credit guarantee scheme for startups; max cover per borrower now Rs 20 crore

The government Thursday approved a revised Credit Guarantee Scheme for Startups ( CGSS), and doubled the maximum guarantee cover per borrower has to Rs 20 crore. The scheme provides collateral-free debt funding to startups, the department for promotion of industry and internal trade ( DPIIT) said in a notification.

The extent of guarantee cover provided has also been increased to 85% of the amount in default for loan amount up to Rs 10 crore and 75% of the amount in default for loan amount exceeding Rs 10 crore.

“Maximum guarantee cover per borrower shall not exceed Rs 20 crore,” the DPIIT said, adding that this notification supersedes the earlier notification dated October 6, 2022 on the scheme and comes into effect from May 8.

The cover was earlier Rs 10 crore.

Further, the Annual Guarantee Fee (AGF) for startups in 27 champion sectors has been reduced to 1% per annum from 2% earlier.

The expanded scheme will further reduce the perceived risks associated with lending to startups in established financial institutions, enabling greater financial flow and runway for startups to undertake research and development, experimentation, and create cutting-edge innovation and technologies.