The Credit Guarantee Scheme for Startups (CGSS) will provide collateral-free loans

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Credit Guarantee Scheme for Startups Online Application Form, Eligibility and Benefits | CGSS scheme Online application form, implementation strategy, list of startups

Any entrepreneur will tell you that starting a new business from scratch is not an easy undertaking. The lack of sufficient funding when it is needed and the very risky outlook of banking institutions on this part have generally been the two main reasons why start-ups find it so difficult to start a business. These two factors have contributed to the difficulties faced by startups. The government has announced that the credit guarantee scheme for new businesses would allow these businesses to obtain unsecured loans up to a certain amount. In this essay, we will discuss CGSS in more detail, including its prerequisites, benefits, and eligibility requirements.

Launch of a credit guarantee program for startups

To begin, we will first talk about the organization that has the main role behind the Credit Guarantee scheme. The Indian Ministry of Commerce and Industry is responsible for the Department of Promotion of Industry and Internal Trade (DPIIT), which is an agency of the Federal Government. It draws up and implements action plans for the promotion and development of the sectors, taking into account national and socio-economic objectives. The DPIIT is in charge of the overall industrial strategy, while various administrative departments are in charge of manufacturing, dispersal, growth, plan development, etc.

DPIIT has announced a credit guarantee program for startups that will provide loans without leverage or collateral. Under their guidelines, any loan or credit facility extended to a qualified borrower on or after October 20, 2022 would be covered by the program. The central government of India has authorized the “Credit Guarantee System for Startups (CGSS) » provide insurance on loans issued by Participating Institutions (MIs) to eligible borrowers who are startups.

Recognizable start-ups that have achieved a secure revenue stream, as measured by audited bank statements over a 12-month period, and are able to secure debt financing, and startups that are not in default to a lending/investment institution and are not considered non-performing assets under RBI guidelines, are eligible to utilize this scheme. The best collateral you can cover a borrower is Rs 10 crore. This cost should not have been covered by any other warranty program.

The money transfer insurance will be 80% of the amount in default if the initial loan approval is up to 3 crore, 75% if it is beyond 3 crore and up to 5 crore, and 65 % if greater than 5 crores (up to 10 crores per borrower).

India Startup Seed Fund Program

CGSS scheme Goals

The current programs that are part of the Startup India initiative will be complemented by the Capital Generation Support System (CGSS), which will work to increase the amount of domestic funding available to Indian start-ups. The objective of the Credit Guarantee Support Scheme (CGSS) is to provide credit guarantees up to a specified limit against loans made by member institutions to finance eligible borrowers, namely start-ups. This guarantee will be provided against loans made by members to finance eligible borrowers.

Credit Guarantee Scheme for Startups Features and Benefits

  • The Startup India scheme, introduced by the Prime Minister, would provide unsecured finance to businesses.
  • Participants in this scheme will issue a guarantee to companies approved by the DIPP.
  • CGSS will provide portfolio-based guarantees for more than 10 seed loans each year.
  • This program offers 75% credit up to Rs.150 lakh.
  • Each qualifying case will get up to Rs. 5 crore in credit guarantees including cash flow, venture capital, potentially convertible bonds, long-term debt, etc.
  • Up to 85% of microenterprise loan applications under Rs. 5 lakh would be granted.
  • Women-owned MSMEs and NERs will get up to 80% loans (including Sikkim).
  • MSME retail would get a 50% guarantee up to Rs.50 lakh.

MeitY SAMRIDH program

Credit Guarantee Program for Startups Prerequisites or Documents

  • Most importantly, all resident partners or directors must have an Aadhaar card, while non-residents must have a passport number.
  • Alternative Investment Funds (AIFs), Regular Commercial Banks/Financial Institutions or NDFCs registered with the RBI can be members.
  • CGSS will follow the National Credit Guarantee Trust Company (NCGTC) guardianship requirements.
  • Members would guarantee up to Rs.500 lakh to qualified contractors without third party guarantee or security.
  • A management committee will oversee this MSME Credit Guarantee (SM) program.
  • The Risk Assessment Committee (REC) will deal with conflicts of interest.

Lending companies eligible for the credit guarantee program

Banks on the official list of government commercial lenders

  • Scheduled Commercial Banks
  • Small Industries Development Bank of India
  • Export and Import Bank of India
  • North East Development Finance Corporation
  • Delhi Finance Corporation
  • Kerala Finance Corporation
  • National Society of Small Industries
  • J&K Development Finance Corporation Ltd
  • Tamil Nadu Industrial Investment Corporation Ltd.
  • State Financial Corporation AP.

PM FME diet

Credit guarantee fees under CGSS

  • The total annual guarantee fee is 1.0% per annum of the amount of the loan granted.
  • Women-owned businesses, micro-enterprises and NER units will be charged a guarantee fee of 0.75% on loan amounts up to Rs.5 lakh, and a guarantee fee of 0.85% on credit amounts between Rs.5 and Rs.100 million.
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