Credit Guarantee Scheme for Startups (CGSS) — Collateral-Free Loans up to ₹20 Crore
A guarantee to the lender, so the startup borrows without collateral
CGSS is the one central scheme on this list that does not hand money to the startup. Instead the Credit Guarantee Fund for Startups, a trust run by NCGTC, promises the lender that if the startup defaults, the trust will make good most of the loss. That promise is what lets a bank, NBFC or venture debt fund lend to a two-year-old company with no property to pledge.
The scheme was rewritten by gazette notification S.O. 2046(E) dated 8 May 2025, which replaced the October 2022 version. Three things changed: the ceiling per borrower doubled from ₹10 crore to ₹20 crore, the cover rose to 85% of the default amount for loans up to ₹10 crore (75% above that), and the annual fee for the 27 Champion Sectors was cut to 1%. Any bank circular still quoting ₹10 crore is quoting the old scheme.
What can be covered
- •Venture debt and term loans
- •Working capital limits
- •Subordinated or mezzanine debt and debentures
- •Optionally convertible debt — cover shrinks if and when it converts to equity
- •Non-fund-based limits once they crystallise into a debt obligation
How much cover, and what it costs
| Parameter | Transaction-based (single loan) | Umbrella-based (venture debt fund) |
|---|---|---|
| Ceiling per borrower | ₹20 crore | ₹20 crore |
| Extent of cover | 85% of default up to ₹10 crore; 75% above | Actual loss or 5% of pooled investment, whichever is lower |
| Annual fee | 2% standard · 1.5% North-East and women-led units · 1% Champion Sectors | 0.15% commitment charge on the pooled investment |
| Claim payout | 75% within 60 days, balance on recovery or write-off | 100% within 60 days as full and final |
The fee is charged on the outstanding amount (on the sanctioned limit for working capital), payable within 30 days of the demand advice, and renewed each year by 30 April. If the fee is not paid, the guarantee on that facility lapses — there is no grace period in the notification.
Department and lenders
DPIIT under the Ministry of Commerce and Industry owns the scheme. NCGTC, a company set up by the Government in 2014 to run its credit guarantee funds, is the trustee and settles claims. The lending decision itself sits with the member institution: scheduled commercial banks, financial institutions, RBI-registered NBFCs rated BBB or better with net worth of at least ₹100 crore, and SEBI-registered AIFs. More than 35 institutions are enrolled.
Three tests for the borrower
- •Recognised as a startup by DPIIT on the date of sanction.
- •Not in default to any lender or investor, and not classified as an NPA under RBI norms.
- •Eligibility certified by the member institution granting the loan.
Private limited companies and LLPs both qualify. The 2022 requirement of a stable revenue stream assessed over twelve months of audited statements no longer appears in the 2025 text, which opens the door to earlier-stage borrowers — though individual lenders may keep it as an internal norm.
What the lender will ask for
- •DPIIT Certificate of Recognition and Certificate of Incorporation
- •PAN, GST registration, Udyam certificate if any
- •MoA/AoA or LLP agreement; list of directors or partners with KYC
- •Audited financial statements for the last two or three years, or provisional accounts for a younger company
- •CMA data and financial projections for the loan tenure; DSCR working for term loans
- •Project or business note explaining the use of funds
- •Bank statements for the last twelve months, all accounts
- •Existing loan sanction letters and repayment track; CIBIL reports of the company and promoters
- •Board resolution authorising the borrowing, and details of any other credit guarantee already attached to the borrower
Conditions that catch people later
- •No double cover: a facility already covered under CGTMSE or another guarantee scheme cannot also carry CGSS.
- •Partial collateral: if some security is offered, only the unsecured portion is covered.
- •Shared cover: where two lenders fund the same startup, the ₹20 crore capacity is shared in proportion, and a second lender gets only what is left.
- •Twelve-month lock-in from the date cover starts, and the cover starts only when the fee is credited.
- •Payments the startup makes to the lender after a claim are deemed to reduce the guaranteed debt first, whatever the founder intended.
Questions founders ask about CGSS
A loan. The startup borrows from a bank, NBFC or AIF and must repay with interest. CGSS only guarantees part of the lender's loss if the startup defaults, which is what makes a collateral-free sanction possible.
The fee is charged to the lending institution, which in practice passes it on in the pricing or as a separate charge. Budget for 1% to 2% of the outstanding amount every year on top of interest.
Yes. CGSS is a guarantee on debt and does not count as monetary support for the purposes of most grant caps. A state grant and a CGSS-backed loan routinely sit side by side.
The 2025 notification dropped the twelve-month revenue test, so nothing in the scheme stops it. In practice most banks want visibility of repayment; venture debt AIFs enrolled as member institutions are the more realistic route for a pre-revenue company with investor backing.