Equity funding gets most of the attention, but many startups need a loan: for working capital, equipment or a bridge between funding rounds. The problem is that banks want collateral, and early-stage companies rarely have any. The Credit Guarantee Scheme for Startups (CGSS) exists to reduce that problem. It does not give you money. It gives your lender a government-backed guarantee, so the lender can say yes with less fear of loss. This guide explains how it works and how a founder should use it.
Quick facts
- What it is: a credit guarantee on loans that lenders give to DPIIT-recognised startups
- Who operates it: the National Credit Guarantee Trustee Company (NCGTC), under the Government of India (DPIIT)
- Who can borrow: startups recognised by DPIIT that are not in default and not classified as a non-performing asset
- Maximum cover: Rs 20 crore per borrower (raised from Rs 10 crore)
- How to apply: through a lender, including via the Jan Samarth portal, not directly to NCGTC
- Last checked: 26 October 2026 against the CGSS page on startupindia.gov.in and the June 2026 Startup India playbook
What Is the Credit Guarantee Scheme for Startups?
The Startup India page describes CGSS as providing credit guarantees up to a specified limit on loans that Member Institutions (MIs), meaning lenders that have joined the scheme, give to eligible startups. The playbook explains it in simpler words: it helps startups access loans by assuring lenders that the government will cover part of the risk, making it easier for young businesses to get funding without collateral.
An important detail is who actually holds the guarantee. The guarantee does not come from DPIIT directly to the startup. It comes through a trustee, the National Credit Guarantee Trustee Company (NCGTC), which in turn covers the lenders.
What Kinds of Loans Can Be Covered?
The official page lists several debt instruments that can be covered. These include venture debt, working capital, subordinated or mezzanine debt, debentures, optionally convertible debt, and other fund-based and non-fund-based facilities that are debt obligations. Cover can be transaction-based (for a specific loan) or umbrella-based (for a pool of investments, used mainly by venture debt funds).
Who Is Eligible?
The startup (borrower)
According to the Startup India page, the borrower must be an entity recognised as a startup by DPIIT. It must not be in default to any lending or investing institution, and it must not be classified as a non-performing asset under RBI guidelines. The lender certifies the startup’s eligibility, so keep your recognition certificate and loan history ready. If you do not have recognition yet, start with our DPIIT recognition guide.
The lender (Member Institution)
The scheme lists three groups of lenders:
- Scheduled commercial banks and financial institutions
- RBI-registered NBFCs, subject to a rating of BBB or above from an RBI-accredited agency and a minimum net worth of Rs 100 crore
- SEBI-registered Alternative Investment Funds (AIFs), which lend through venture debt funds
This matters because you cannot use CGSS with just any lender. Ask whether the bank or NBFC you are talking to is a member institution.
How Much Is Guaranteed?
The Startup India page gives the following figures for guarantee cover.
| Type of cover | What is covered | Cap |
|---|---|---|
| — | — | — |
| Transaction-based | 85% of the amount in default for loans up to Rs 10 crore; 75% for loans above Rs 10 crore | Rs 20 crore per borrower |
| Umbrella-based | The lower of actual losses or 5% of the pooled investment | Rs 20 crore per borrower |
The June 2026 playbook summarises the benefit as a maximum guarantee of Rs 20 crore or the actual outstanding credit, whichever is less.
Read this carefully. The guarantee covers the lender’s loss if you default. It does not forgive your loan, and you still owe the money to the lender. It also does not mean the lender must approve you. The lender still checks whether your business is viable.
How to Apply Step by Step
The Startup India page describes the process in four stages:
1. Approach a lender. You can apply online through the Jan Samarth portal, directly at a branch of a member institution, or through the listed member institutions on the page (Axis Bank, Bank of Baroda and HDFC Bank were named).
2. The lender assesses your case. It looks at feasibility, viability and eligibility, then sanctions the loan if it is satisfied.
3. The lender applies for guarantee cover on the NCGTC portal.
4. Cover is issued once the eligibility parameters are met. The page says the lender is responsible for making sure they are.
So your real work is to prepare a loan application that a lender can approve: financial statements, business plan, cash-flow projection, DPIIT certificate and details of any existing borrowings.
Is There a Fee?
The CGSS page we reviewed does not mention a guarantee fee or other charges. That does not mean there are none. The operational guidelines are linked from the NCGTC website. Ask your lender in writing about every fee, including any processing charge, before you sign.
CGSS vs CGTMSE: Which One Applies to You?
Founders often confuse the two schemes. CGTMSE, run by the MSME Ministry and SIDBI, guarantees collateral-free loans to micro and small enterprises. The playbook states it guarantees 75% of the loan amount to the bank, with a cap of Rs 10 crore per borrower, and the loan must meet the MSME definition. CGSS is built specifically for DPIIT-recognised startups. A startup that is also a registered micro or small enterprise may be able to talk to its lender about both. Compare the terms and ask the lender which scheme it can offer.
Common Mistakes
- Applying to NCGTC yourself. Startups do not apply for the guarantee. Your lender does.
- Thinking the guarantee removes the need for a good loan file. Lenders still decide on credit quality.
- Starting without DPIIT recognition. It is a basic requirement for CGSS.
- Ignoring existing defaults. If you are in default to any lender, you are not eligible.
- Not asking about fees and interest. The guarantee is only one part of the cost of a loan.
- Confusing CGSS with grants. This is credit. You must repay.
Frequently Asked Questions
Does CGSS require collateral?
The playbook describes the scheme as helping startups get loans without collateral because the government covers part of the lender’s risk. Lenders may still have their own conditions, so ask directly.
Where can I get help?
The Startup India page lists a toll-free number, 1800 115 565, available from 10:00 AM to 5:30 PM. Confirm it on the official page before calling.
Is CGSS the same as the Seed Fund Scheme?
No. The Seed Fund Scheme provides grants and investments through incubators. CGSS provides a guarantee on loans from lenders.
Where to Go Next
Browse the Startup India guides hub for the full series, and read about the Fund of Funds if you are thinking about equity instead of debt.
Last checked: 26 October 2026 against the Credit Guarantee Scheme for Startups page on startupindia.gov.in. This is general information, not legal, tax or financial advice. Limits and lender lists change, so confirm on the official pages and with your lender.
