Credit Guarantee Scheme for Startups (CGSS)

What is the Credit Guarantee Scheme for Startups?

Credit Guarantee Scheme for Startups (CGSS) is a scheme of the Department for Promotion of Industry and Internal Trade (DPIIT) under the Ministry of Commerce and Industry that provides a government-backed guarantee on collateral-free loans given to DPIIT-recognised startups. CGSS was first notified on 6 October 2022 and a revised, expanded notification took effect on 8 May 2025.

CGSS exists because most startups are asset-light. A software or deep-tech company has code, contracts and a team, but no land or machinery to pledge, so banks either refuse the loan or ask for a personal guarantee. CGSS shifts the credit risk to a government trust, so the lender can price and approve the loan without collateral.

According to the Startup India portal run by DPIIT, CGSS is operationalised by the National Credit Guarantee Trustee Company (NCGTC), which issues the guarantee to the lender and settles claims on default.

Key objectives

• Provide credit guarantees on loans to DPIIT-recognised startups.
• Remove the collateral requirement that blocks early-stage borrowing.
• Bring venture debt and AIF debt instruments into a guaranteed framework.
• Support 27 identified Champion Sectors with a lower guarantee fee.

Main features

• Maximum guarantee cover of Rs 20 crore per borrower, doubled from Rs 10 crore in the 2025 revision.
• Transaction-based guarantee: 85% of the amount in default for loans up to Rs 10 crore, and 75% of the amount in default above Rs 10 crore.
• Umbrella-based guarantee: actual losses or 5% of the pooled investment in eligible startups, whichever is lower, capped at Rs 20 crore per borrower.
• Annual Guarantee Fee reduced to 1% for 27 Champion Sectors, from 2%.
• Instruments covered include term loans, working capital, venture debt and fund-based as well as non-fund-based facilities.

Who is eligible for the Credit Guarantee Scheme for Startups?

A startup can be covered if:

• It is recognised as a startup by DPIIT as per the Startup India gazette notifications.
• It is not classified as a non-performing asset by any lender.
• It is not in default to any lending or investing institution.
• Its eligibility is certified by the lending institution extending the facility.

Member institutions that can seek cover:

• Scheduled commercial banks and financial institutions engaged in lending.
• NBFCs rated BBB or above by an external credit rating agency, with a minimum net worth of Rs 100 crore.
• SEBI-registered Alternative Investment Funds investing in startups through debt or debt-linked instruments.

You cannot apply if:

• You are an individual seeking a personal loan. CGSS is a guarantee to a lender on a business facility, not a personal benefit, and individuals cannot apply for it directly.
• Your startup is not DPIIT-recognised. Registration on the Startup India portal alone is not enough; the DPIIT recognition certificate is the test.
• Your account is an NPA or in default, in which case the startup is not eligible for fresh guarantee cover.
• You approach a lender that is not a member institution of NCGTC under CGSS, that loan cannot be guaranteed however eligible the startup is.
• You are a proprietorship or an unregistered business, which cannot obtain DPIIT startup recognition in the first place and is therefore not eligible.

What documents are required for CGSS?

How to apply for the Credit Guarantee Scheme for Startups

CGSS is applied for by the lender, but the process starts with the startup.

1. Get DPIIT recognition for your startup on startupindia.gov.in and download the recognition certificate. Without it, no lender can seek CGSS cover.
2. Prepare the credit proposal; business plan, projections, audited financials, the amount sought and the purpose, whether term loan, working capital or venture debt.
3. Approach a member lending institution — a scheduled commercial bank, an eligible NBFC or a SEBI-registered AIF that participates in CGSS. Applications can also be submitted through the Jan Samarth portal, which routes them to participating lenders.
4. Ask explicitly for CGSS cover when you submit, so the branch processes the proposal as a collateral-free case rather than asking for security.
5. Let the lender appraise and sanction the facility. The lender certifies that your startup is DPIIT-recognised, is not an NPA and is not in default.
6. Lender applies to NCGTC for the guarantee and pays the Annual Guarantee Fee, which is 1% for the 27 Champion Sectors and is normally recovered from the borrower.
7. Complete documentation and drawdown after the guarantee is registered, and keep servicing the facility. The guarantee protects the lender, not the borrower, from the consequences of default.

How much benefit does CGSS provide?

CGSS does not give a startup money. It gives a lender comfort, which is what makes the loan possible. The scale of that comfort is:

• Rs 20 crore maximum guarantee cover per borrower, up from Rs 10 crore before 8 May 2025.
• 85% of the amount in default covered for loans up to Rs 10 crore.
• 75% of the amount in default covered for loans above Rs 10 crore.
• 5% of pooled investment, or actual loss if lower, under the umbrella guarantee route used by AIFs.
• 1% Annual Guarantee Fee for the 27 Champion Sectors, halved from 2%.

For a startup, the practical benefit is access to a term loan or venture debt without pledging property or giving a third-party guarantee.

What changed in the 2025 revision of CGSS?

• The guarantee ceiling doubled from Rs 10 crore to Rs 20 crore per borrower.
• The extent of cover was raised to 85% for loans up to Rs 10 crore and 75% beyond that.
• The Annual Guarantee Fee fell to 1% for 27 Champion Sectors.
• The revised notification supersedes the notification of 6 October 2022 and came into effect from 8 May 2025.

Common reasons CGSS proposals fail

• No DPIIT recognition, or recognition that has lapsed or been withdrawn.
• Existing default or NPA classification with any lender.
• Weak or unbankable business plan, CGSS does not override credit appraisal.
• Lender is not a member institution, so no guarantee can be registered.
• Guarantee fee unpaid, which prevents the cover from taking effect.
• Facility not of a covered type, for example a pure equity investment rather than debt or a debt-linked instrument.

Help and grievance redressal

• Startup India toll free helpline: 1800 115 565, 10:00 AM to 5:30 PM
• Startup India portal: startupindia.gov.in, for DPIIT recognition and the CGSS scheme page
• NCGTC: ncgtc.in, which publishes the CGSS product details and operating guidelines for member institutions
• Your lending institution's branch and nodal officer, for the status of a specific proposal

No agent can obtain CGSS cover for a startup. The guarantee is applied for by the lender to NCGTC, and any person offering to "arrange" a guarantee for a fee should be refused.