The Ministry of Commerce on 6th October 2022, has notified the Credit Guarantee Scheme for Startups for the purpose of providing credit guarantees to loans extended by Member Institutions (MIs) to finance eligible borrowers being Startups.
The broad objective of CGSS is to provide guarantee upto a specified limit against credit instruments extended by Member Institutions (MIs) to finance eligible Startups. This scheme would help provide the much needed collateral free debt funding to Startups.
The eligibility criteria for an entity to borrow under the Credit Guarantee Scheme for Startups shall be as follows, wherein an entity should be:
- Startup as recognized by DPIIT as per Gazette Notifications issued from time to time, and
- Startups that have reached stage of stable revenue stream, as assessed from audited monthly statements over a 12 month period, amenable to debt financing, and
- Startup not in default to any lending/investing institution and not classified as Non-Performing Asset as per RBI guidelines, and
- Startup whose eligibility is certified by the member institution for the purpose of guarantee cover.
A lending/investing institution shall not be entitled to a guarantee in respect of eligible loan/ venture debt facilities granted by it unless it has entered into an agreement with Trustee/submitted an undertaking to the Trustee in such form as may be required by the Trustee.
For availing the guarantee cover, the Member Institution shall pay Annual Guarantee Fee (AGF) of 2% p.a. of the disbursement/outstanding amount (on sanction amount, in case of working capital facility and non-fund based facility) as on the date of application of guarantee cover, upfront to the Trust within 30 days from the date of Credit Guarantee Demand Advice Note (CGDAN) of guarantee fee.
For units from the North East region as well as those of women entrepreneurs, the Member Institution shall pay a standard rate of 1.5% p.a. of the disbursement/outstanding amount (on sanction amount, in case of working capital facility and non-fund based facility) as on the date of application of guarantee cover, upfront to the Trust within 30 days from the date of Credit Guarantee Demand Advice Note (CGDAN) of guarantee fee.
