Credit Guarantee Scheme for Startups (CGSS) — Guarantee up to &rupee;10 Crore
Complete guide to CGSS under Startup India — collateral-free loan guarantee for DPIIT-recognised startups through scheduled commercial banks, NBFCs & AIFs. Managed by NCGTC.
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Credit Guarantee Scheme for Startups — Step-by-Step Guide
Prepared by TaxClue's CA/CS team. Updated for 2026.
What Is the Credit Guarantee Scheme for Startups (CGSS)?
The Credit Guarantee Scheme for Startups (CGSS) was launched on 6 October 2022 by DPIIT (Department for Promotion of Industry & Internal Trade) under the Startup India initiative. It provides credit guarantee to lending institutions that extend loans to DPIIT-recognised startups without demanding collateral or third-party guarantee. The scheme enables startups to access venture debt, term loans, and other credit facilities up to &rupee;10 crore per startup. CGSS is managed by the National Credit Guarantee Trustee Company Limited (NCGTC), a wholly-owned company of the Government of India.
Eligibility — DPIIT Recognition Is Mandatory
To benefit from CGSS, your startup must be recognised by DPIIT under the Startup India programme. Eligibility criteria: (a) The entity must be incorporated as a Private Limited Company, LLP, or Registered Partnership Firm. (b) It must hold a valid DPIIT recognition certificate. (c) The entity should be less than 10 years old from the date of incorporation. (d) Annual turnover must not have exceeded &rupee;100 crore in any financial year since incorporation. (e) The startup should not be classified as an NPA with any lending institution. If you don't have DPIIT recognition yet, apply at startupindia.gov.in first — it typically takes 2–5 working days.
Guarantee Coverage & Structure
CGSS provides guarantee coverage of up to &rupee;10 crore per startup. The scheme operates through two modes: (a) Transaction-based guarantee: Individual loan-level guarantee where the lending institution applies for coverage on each loan separately. Coverage is typically 70–80% of the outstanding credit amount. (b) Portfolio-based guarantee: The lending institution gets guarantee coverage on a portfolio of startup loans, enabling faster processing. The coverage and fee structure may vary between the two modes. The guarantee is provided to the lending institution, not directly to the startup. Both funded and non-funded credit facilities are eligible for coverage.
Guarantee Fee Structure
The annual guarantee fee under CGSS ranges from 1% to 3% of the guaranteed amount, depending on the type of guarantee (transaction-based or portfolio-based) and the lending institution. The fee is structured as: (a) One-time guarantee fee: Paid upfront at the time of guarantee approval. (b) Annual service fee: Paid annually on the outstanding guaranteed amount. The fee is typically borne by the lending institution but may be passed on to the startup as part of the loan cost. Compared to CGTMSE (which charges 0.37–2%), CGSS fees are slightly higher but the coverage limit is also significantly higher (&rupee;10 crore vs. &rupee;5 crore).
Participating Lending Institutions
CGSS guarantee is available through: (a) Scheduled Commercial Banks — SBI, HDFC Bank, ICICI Bank, Axis Bank, and other public/private sector banks. (b) Non-Banking Financial Companies (NBFCs) — registered with RBI and empanelled under CGSS. (c) SEBI-registered Alternative Investment Funds (AIFs) — venture debt funds that provide debt financing to startups. Not all banks and NBFCs are enrolled under CGSS — the startup should verify with its lender whether they are a Member Lending Institution (MLI) of CGSS. The list of enrolled MLIs is available on the NCGTC website.
Types of Credit Facilities Covered
CGSS covers a broad range of credit instruments relevant to startups: (a) Venture debt — debt financing typically provided alongside or after equity rounds, used for runway extension, working capital, or capex. (b) Term loans — for equipment purchase, technology development, or business expansion. (c) Working capital facilities — cash credit, overdraft, or demand loans for operational expenses. (d) Non-fund-based facilities — bank guarantees and letters of credit. This flexibility makes CGSS particularly useful for startups that need diverse financing structures beyond traditional equity funding.
How to Apply for CGSS
Startups cannot apply to CGSS directly. The process works through your lender: Step 1: Ensure your startup has valid DPIIT recognition. Step 2: Approach a bank, NBFC, or AIF that is enrolled as a Member Lending Institution under CGSS. Step 3: Apply for a loan (venture debt, term loan, or working capital) with the lender. Step 4: Request the lender to process the loan under CGSS guarantee instead of demanding collateral. Step 5: The lender evaluates your application and, if approved, applies to NCGTC for guarantee coverage. Step 6: NCGTC approves the guarantee, and the lender disburses the loan without collateral. The entire process typically takes 30–60 days depending on the lender's internal processing time.
Claim Settlement & Default Process
If a startup defaults and the loan is classified as NPA, the lending institution can file a claim with NCGTC under CGSS. The process involves: (a) The lender classifies the account as NPA as per RBI norms (typically 90 days of non-payment). (b) The lender initiates recovery proceedings against the startup. (c) After the specified lock-in period, the lender files a claim with NCGTC. (d) NCGTC verifies the claim and settles it based on the guaranteed percentage (70–80% of the outstanding amount, up to &rupee;10 crore). (e) Post-settlement, NCGTC has subrogation rights — it can pursue recovery from the defaulting startup. Startups should note that defaulting on a CGSS-backed loan has the same consequences as any loan default — CIBIL impact, legal proceedings, and director liability.
CGSS vs. CGTMSE — Which Is Better for Your Business?
Key differences: CGSS is specifically for DPIIT-recognised startups with a higher limit of &rupee;10 crore, covers venture debt, and is managed by NCGTC. CGTMSE is for all micro and small enterprises (not startup-specific) with a limit of &rupee;5 crore and is managed by the CGTMSE Trust (GOI + SIDBI). If your startup is also classified as a micro/small enterprise and needs less than &rupee;5 crore, you may be eligible for both. CGTMSE has lower fees (0.37–2%) compared to CGSS (1–3%). For startups needing venture debt or larger credit facilities, CGSS is the better option. For smaller traditional bank loans, CGTMSE may be more cost-effective.
Tips for Startups Seeking CGSS-Backed Financing
Practical advice: (a) Get DPIIT recognition first — this is a prerequisite and takes only a few days. (b) Approach venture debt funds (like Alteria Capital, Trifecta Capital, InnoVen Capital) that are already enrolled MLIs under CGSS. (c) Prepare a strong pitch deck with financial projections, revenue metrics, and a clear use-of-funds plan. (d) Having prior equity funding (angel or VC round) significantly improves your chances of getting venture debt under CGSS. (e) Negotiate the guarantee fee — some lenders absorb part of it. (f) Maintain clean financials and a good CIBIL score for all directors. (g) TaxClue can help with DPIIT recognition, financial documentation, and connecting you with CGSS-enrolled lenders.
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