Credit Guarantee Scheme for Startups (CGSS)

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.

Eligible Borrower

The eligibility criteria for an entity to borrow under the Credit Guarantee Scheme for Startups shall be as follows, wherein an entity should be:

i. Startup as recognized by DPIIT as per Gazette Notifications issued from time to time, and

 ii. 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

 iii. Startup not in default to any lending/investing institution and not classified as Non-Performing Asset as per RBI guidelines, and iv. Startup whose eligibility is certified by the member institution for the purpose of guarantee cover.

Guarantees

  1. Credit guarantee cover under this model would be either transaction based or umbrella based.
  2. AIFs shall not be eligible to avail transaction based guarantee cover under the scheme.
  3. In respect of transaction-based guarantee cover, the guarantee cover will commence from the date of payment of guarantee fee and shall run through the agreed tenure of the Loan/debt facility.
  4. In respect of umbrella-based guarantee, the cover is based on the Pooled Investment in Startups. The guarantee cover will commence from the date of payment of commitment charges and shall run through the life of the VDF provided the borrowers being covered are eligible for coverage under the scheme and commitment charges are paid from the first year of operations of VDF annually till its closure.

Ceiling on guarantee cover

  1. Maximum guarantee cover per borrower shall not exceed Rs.10 crore.
  2. The credit facility being covered here should not have been covered under any other guarantee scheme.
  3.  In respect of credit facilities where a portion of the same has been secured by way of partial collateral security, the remaining part comprising of the unsecured facility will be covered under the guarantee scheme

Extent of the guarantee For transaction-based guarantee cover –

The Trust shall provide guarantee cover, subject to a maximum of Rs.10 crore per borrower, as per details given below:

 i. to the extent of 80% of the amount in default if the original loan sanction amount is upto Rs.3 crore ii. to the extent of 75% of the amount in default if the original loan sanction amount is above Rs. 3 crore and upto Rs. 5 crore iii. to the extent of 65% of the amount in default if the original loan sanction amount is above Rs. 5 crore.

For umbrella-based guarantee cover

 i. The Trust shall provide guarantee cover of actual losses or upto a maximum of 5% of Pooled Investment on which cover is being taken from the fund in Startups, whichever is lower, subject to a maximum of Rs.10 crore per borrower

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