CGSS: how a startup borrows with nothing to pledge
No cash reaches your account under this scheme. What arrives is a bank willing to write a loan against a company that owns nothing worth taking.
Summary
- The cover runs to 85% of the amount in default on facilities up to INR 10 crore, and 75% above that, with a ceiling of INR 20 crore per borrower.
- It is not free. An annual guarantee fee of 2% of the covered amount applies, falling to 1% for startups in the 27 notified champion sectors.
- There is no application season and no scheme portal to win. You apply to a bank, and the bank applies for the cover once it has decided to lend.
Every few weeks a founder tells us they have applied for the credit guarantee scheme and asks how long the money takes to arrive. There is no money. The question is a fair one, and the answer still catches almost everybody who asks it.
CGSS is the Credit Guarantee Scheme for Startups. DPIIT notified it on 6 October 2022 and expanded it in 2025, and it is monitored by NCGTC, a government trustee company. It sits in the grants and schemes register next to grants and schemes, and it behaves nothing like either of them.
Who does a credit guarantee actually pay?
A guarantee is a promise made to your lender, not to you. If you default, the trust behind the scheme pays that lender a fixed share of what you owed. Nothing is ever paid to the startup, including on the day the cover is issued.
Put that way it sounds like a scheme for banks, and in a narrow sense it is. What makes it yours is the loan it makes possible. A bank asked to lend crores to a young company with no land, no machinery and nothing worth pledging will normally say no. It says no for a good reason.
The cover does the job that security would have done. That is the logic of the whole credit guarantee instrument, and it is the only instrument in the register that works this way. Everything else either pays you or buys a share of you.
The state is not funding you here. It is absorbing a slice of your lender's loss so that your lender can say yes.
How much of the loan is actually covered?
Two bands, split by the size of the facility, with one ceiling sitting over both of them.
CGSS transaction-based cover, after the 2025 expansion
| Size of the credit facility | Cover on the amount in default | Ceiling |
|---|---|---|
| Up to INR 10 crore | 85% | INR 20 crore of debt per borrower |
| Above INR 10 crore | 75% | INR 20 crore of debt per borrower |
Read the middle column carefully. The percentage applies to the amount in default, which is what is outstanding and unpaid when you default. It is not a share of the sanctioned facility, and the difference is large once a loan has been part repaid.
The ceiling is the other thing people misread. INR 20 crore is the most debt per borrower that can carry cover under the scheme. It is not a cap on what your project may cost, and it is not a promise that anyone will lend you that much.
What does the guarantee fee add to your cost of borrowing?
An annual guarantee fee is charged on the guaranteed amount at 2% a year. Startups in the 27 notified champion sectors pay 1%. It is charged every year the cover runs, and it sits on top of the interest your lender charges you.
This is the number founders leave out when they compare a guaranteed loan with a normal one. Include it. Then compare it with the thing you are actually choosing between, which is this loan with a fee, or no loan at all because you have nothing to pledge.
Are you the kind of borrower the scheme will cover?
Four conditions, and the first is the one that sends most people away for a fortnight.
- DPIIT recognition. It is the gating requirement, and there is no route around it. We have written separately on what that certificate does and does not include.
- No existing default. You cannot be in default to any lender or investor, and the account cannot be classified as an NPA.
- Certification by the lender. Your eligibility is certified by the Member Institution, so the lender is checking the scheme criteria as well as your credit.
- A registered lender. The loan has to come from a registered Member Institution: a scheduled commercial bank, an eligible NBFC, or a -registered .
One caution that the register flags rather than asserts. Member Institutions publish notes saying real estate projects and Hindu Undivided Families are not permitted, citing a Gazette notification of 8 May 2025. That comes from a lender's own page, not from the master operational guidelines, so treat it as a question for your bank. Recognition itself is the gate credential worth holding first.
Which kinds of borrowing can sit under the cover?
Wider than most founders assume. The eligible instruments include , working capital, term loans, subordinated and mezzanine debt, debentures and optionally convertible debt. Other fund-based and non-fund-based facilities qualify once they have crystallised as debt obligations.
That list is worth rereading if you have been treating this as a term-loan scheme. Venture debt with a guarantee behind it is a genuinely different conversation with a lender. It is the use we see working best for companies that have already raised equity.
How do you apply when there is no application season?
You do not apply to the scheme at all. You apply for a loan, and the scheme arrives behind it.
- Get , because nothing below starts without it.
- Approach a registered Member Institution directly, or go through the Jan Samarth portal.
- The lender examines the feasibility and viability of what you are funding, confirms you meet the eligibility parameters, and sanctions need-based collateral-free credit.
- The lender applies on the NCGTC portal for guarantee cover. Once the eligibility parameters are met, the issue of cover is automatic.
Notice what is absent. There is no call to wait for, no pitch to a selection committee and no cohort. The seven stages a grant application runs through mostly do not happen here, because the thing being appraised is your creditworthiness on a lender's timetable.
That cuts both ways. Nobody is scoring your innovation, so a weak credit file will not be rescued by a strong story. Your loan application is a loan application, and the scheme only changes what happens if it goes wrong.
Why do venture debt funds get a different cover?
Two cover models run under the one scheme, and founders only ever meet the first. Transaction-based cover is the per-borrower version: the 85% and 75% bands above, sized to your facility.
Umbrella-based cover is built for venture debt funds. It pays actual losses, or up to 5% of the pooled investment, whichever is lower. The same maximum of INR 20 crore per borrower still applies, and the cover runs through the life of the fund. You still borrow the same way. The difference is in how your lender's protection is computed, which is worth knowing when you are asking a fund why it can lend to you at all.
Is CGSS worth building your plan around?
It suits a company with a real use for debt and no assets to secure it: a working capital gap, equipment, a contract you have won and need to fund. It does not suit a pre-revenue company looking for its first money, because no guarantee makes a lender comfortable with a business that cannot service a loan.
The other honest limit is that you are taking on debt. The scheme removes the collateral problem and leaves the repayment problem exactly where it was. If you are unsure which side of that line you are on, the chooser article runs the four questions that usually settle it.
The CGSS register page carries the eligibility, benefits and process steps with the source behind each one. If you would rather have someone check the file before your bank does, our grants and schemes work starts there, and it is CS Manavi Arora's desk.
Frequently asked questions
Does CGSS put money into my company?
No. It pays your lender a share of the amount in default if you fail to repay. The benefit you receive is the loan itself, on terms and at a size a bank would not otherwise offer an unsecured startup.
Do I apply to DPIIT or to a bank?
To a bank, an eligible NBFC or a SEBI-registered AIF, either directly or through the Jan Samarth portal. The lender then applies to NCGTC for the cover. DPIIT recognition is a prerequisite you hold before any of that, not an application you file for this scheme.
How much debt can one borrower have covered?
Up to INR 20 crore of debt per borrower. Within that, cover is 85% of the amount in default for a facility up to INR 10 crore and 75% for a facility above it. The ceiling was raised from INR 10 crore in the 2025 expansion.
Who pays the annual guarantee fee?
The fee is charged on the guaranteed amount at 2% a year, or 1% for the 27 notified champion sectors. It is a cost of the facility, so ask your lender to show you exactly where it appears in the sanction letter before you sign.
Can a proprietorship use this scheme?
No, because the scheme gates on DPIIT recognition and sole proprietorships cannot hold it. The same exclusion applies to Hindu Undivided Families. Converting to an eligible entity first is the only route in.
General guidance, current as at September 2026. Scheme terms, cover bands and fees change by notification, and individual lenders apply their own credit policy on top. Check the register or the scheme's own portal before you act on anything here.
How useful was this article?
One tap. It tells us what to write more of.
About the author
Lead - Company Secretarial, Compliance & Fundraise Advisory
Everything Manavi has writtenLinkedInThe next one
Get what we publish next, by email.
Working notes on raising, borrowing, protecting, growing and structuring capital in India. One email a week at most, and you can leave any time.
We use your address only to send this. See our privacy policy.
We store your address to send you these emails and nothing else. See our privacy policy.
Related reading
