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There is a good news for startups in India. The Government of India has increased the limit of collateral-free startup loans to Rs.20 crore.
The Indian government has approved an updated Credit Guarantee Scheme for Startups (CGSS), which will now give startups even more support in getting loans. The most important change is that the maximum guarantee per borrower has been doubled from ₹10 crore to ₹20 crore.
This scheme is designed to help startups get loans without the need for collateral (security). Many startups struggle to get loans because they don’t have assets to offer as security. With this scheme, the government promises to cover part of the risk for banks, NBFCs, and financial institutions, making it easier for them to lend money to startups.
What is the purpose of the CGSS?
The main goal of the Credit Guarantee Scheme for Startups is to give startups access to loans and credit facilities without needing to pledge assets. The government steps in as a guarantor, covering a portion of the loan if the startup fails to repay. This makes banks and lenders feel safer and more willing to support early-stage companies.
Who can benefit from the scheme?
The scheme applies to startups that are eligible under the rules, and the lenders include banks, financial institutions (FIs), non-banking financial companies (NBFCs), and alternative investment funds (AIFs) that are part of the scheme.
What are the key updates?
Here’s a simple breakdown of the major updates:
✅ Maximum guarantee per borrower: Increased from ₹10 crore to ₹20 crore.
✅ Guarantee cover (amount the government promises to cover if the borrower defaults):
- 85% for loans up to ₹10 crore
- 75% for loans above ₹10 crore
✅ Annual Guarantee Fee (AGF): For startups in 27 key sectors called “champion sectors,” the fee has been reduced from 2% to 1% per year.
Why is this important?
Startups often need money to fund research, development, innovation, and new technologies. But lenders see startups as risky, so they hesitate to give loans. With this updated scheme, the government helps reduce the risk for lenders, which encourages them to provide more funding to young businesses. This also supports India’s goal of becoming a hub for innovation and entrepreneurship.
When does the new rule start?
The new notification replaces the earlier one from October 6, 2022, and comes into effect from May 8, 2025.
How does this fit into the bigger picture?
The change was first proposed in the Union Budget 2025–26 as part of efforts to boost startup funding in India. By giving startups easier access to loans, the government hopes to boost job creation, promote innovation, and strengthen India’s position as a global startup powerhouse.
How to apply for startup loan?
You can easily apply for startup loan by visiting any branch of your bank. Some Banks like SBI also provide opportunity to apply for startup loan online. Click here to apply for startup loan in SBI.
