Collateral Free Loans: The government has announced a credit guarantee scheme for startups, which will provide collateral-free loans up to a certain limit. The Department for Promotion of Industry and Internal Trade (DPIIT) stated in a notification that loan/debt facilities sanctioned to an eligible borrower on or after October 6, would be covered under the scheme.
Also Read: Rahul Koli of ‘Chhello Show’, India’s entry to Oscars, dies at 10
Amid tightening liquidity conditions in the country, the union government announced the creation of the Credit Guarantee Scheme for Startups (CGSS) on Friday in order to increase the availability of collateral-free loans to startups.
This comes as funding for Indian startups has declined dramatically this year. According to some estimates, startup funding fell to $885 million in August from $4.6 billion in January 2022.
Good News!
Big boost to startups in #NewIndia pic.twitter.com/IBFs7mcLCD
— MyGovIndia (@mygovindia) October 11, 2022
The credit guarantee cover under the scheme would be “transaction-based,” with exposure to individual cases capped at 10 crores per case or the actual outstanding credit amount, whichever is less, according to a statement from the ministry of commerce and industry.
The move is intended to assist start-ups that have been hard hit by the pandemic and will now be impacted further by the rising interest rate scenario, in which liquidity is unlikely to be readily available to new entrepreneurs. The government has already implemented the Rs 5-trillion Emergency Credit Line Guarantee Scheme (ECLGS) for Covid-affected businesses. The latest scheme, albeit limited to start-ups, will complement the government’s efforts, through various programmes, to ensure a steady flow of credit to businesses in the aftermath of the pandemic.
“The Central Government has approved the ‘Credit Guarantee Scheme for Startups (CGSS) to provide credit guarantees to loans extended by member institutions (MIs) to finance eligible borrowers who are startups,” the statement said.
MIs are financial intermediaries (banks, financial institutions, NBFCs, and AIFs) that lend or invest and meet the Scheme’s eligibility criteria.
CGSS would apply to loans made by Scheduled Commercial Banks, Non-Banking Financial Companies, and Alternative Investment Funds registered with SEBI (AIFs).
According to the Indian Startup Funding Report Q3 2022, funds raised by Indian startups between January and September fell 19% year on year to $22 billion. Furthermore, as analysts frequently point out, the majority of the funds are dominated by relatively stable start-ups. Over 75,000 DPIIT-recognized start-ups can benefit from the scheme if certain conditions are met.
The list of eligibility criteria and loan options offered by the Government of India for start-ups is as follows:
- Mudra Loan Scheme.
- MSME Business Loans in 59 Minutes.
- The Credit Guarantee Scheme (CGS)
- Stand Up India Scheme.
- Coir Udyami Yojana.
- National Bank for Agriculture and Rural Development (NABARD)
- Credit Link Capital Subsidy Scheme.
- National Small Industries Corporation Subsidy.
ELIGIBILITY FOR A START-UP LOAN IN INDIA:
To be eligible for a start-up business loan in India, you must meet the following criteria:
1.The candidate must be an Indian citizen.
2.The candidate must have a distinct business strategy or plan.
3.The candidate must be between the ages of 21 and 65.
4.PAN card, Aadhaar card, and Voter-ID are examples of candidate identification documents.
5.Address proof, such as a driver’s licence or Aadhaar card.
6.PAN Card for the establishment of a business.
