Slow money on a machine, fast money on a round
Before you compare what the two cost, work out which of them your company could actually be underwritten for today.
Summary
- The register's debt schemes are SMILE, SMILE Equipment Finance and Stand-Up India. Each is a lender's credit decision, not a scheme call you win.
- All of them want your own money in first. Stand-Up India funds up to 85% of project cost and asks for at least 10% from you.
- CGSS is not a loan. It is cover the lender gets if you default, and it is the reason a company with nothing to pledge can borrow at all.
A founder asked us last quarter whether to take a SIDBI machinery loan or the on her desk. Both were debt, so it sounded like a question about pricing. It was not.
The register carries three debt schemes and one credit guarantee. Reading them next to a venture debt sheet shows where the real difference sits, and it is not the interest rate. It is who underwrites you, and what they take security over.
What does the government actually lend against?
Against assets, mostly. SMILE is a term loan for investment in plant and machinery bought from an original equipment manufacturer. SMILE Equipment Finance covers plant and machinery, movable fixed assets and need-based civil work. Stand-Up India is broader, funding a first enterprise in manufacturing, services, agriculture-allied work or trading.
The three debt schemes in the register, on the terms each one publishes
| Scheme | What it funds | Size and term | What you bring |
|---|---|---|---|
| SMILE | Plant and machinery bought from an OEM | Generally up to INR 1 crore, repayable in up to 60 months including moratorium | Three years in business, Udyam and GST registration, minimum 15% promoter contribution |
| SMILE Equipment Finance | Plant and machinery, movable fixed assets, need-based civil work | From INR 10 lakh, up to 72 months including moratorium. The maximum is capped but not published | The same three-year record, on a separate application through SIDBI's contactless platform |
| Stand-Up India | A first, greenfield enterprise, including trading | INR 10 lakh to INR 1 crore, over 7 years with a moratorium of up to 18 months | An sc, st or woman promoter with a controlling stake, and at least 10% of project cost |
Two of those are SIDBI products and the third is a bank loan made under a central scheme. In all three the decision is a credit decision, taken on your accounts and your project, by the institution putting up the money.
How much of your own money goes in first?
This is the question that decides whether the scheme is reachable at all. Stand-Up India lends up to 85% of project cost, and the borrower brings a minimum of 10% as own contribution. Margin money can run to 15%, and part of it may be met in convergence with other central or state schemes.
SMILE is appraised on a maximum debt to ratio of three to one, with a minimum promoter contribution of 15%. That contribution is where most first-time applicants stop. The money for it has to come from somewhere that is not the loan.
Which is the reason the soft loan exists.
What makes a soft loan soft?
SMILE carries a soft-loan component that funds part of the promoter contribution itself. For a general-category promoter that is up to 10% of project cost, capped at INR 20 lakh. Where SC, ST, women or persons with disability promote the unit and hold at least a 51% stake, it rises to 15% of project cost, capped at INR 30 lakh.
The shape of it is the interesting part. The soft loan sits as quasi-equity for the first three years and then converts into a secured term loan. It bridges the gap between what the lender will fund and what the promoter can find, which is the gap that stops most machinery purchases.
One caution, and the register carries it. These soft-loan terms come from descriptions of the 2015 design of the product, and SIDBI has since restructured its product pages. The current page asks for at least three years in business, where the original scheme also covered new units. Confirm the live sanction terms with SIDBI before building a plan on them.
A second restriction is easy to miss. A SMILE loan cannot be used to repay an earlier or existing loan, so it is not a refinancing instrument.
Venture debt answers a different question
Nothing about venture debt sits in the register, so read this section as our view from the deals we see rather than as sourced figures.
Venture debt is quicker, and you pay for the speed. It is not tied to a machine and it does not wait on a project appraisal. It is usually written on the strength of a recent institutional equity round, and on the that round buys. Government debt asks what you are buying. Venture debt asks who just backed you.
The two are not sealed off from each other. CGSS lists venture debt among the instruments its cover can attach to, alongside working capital, term loans, subordinated and mezzanine debt, debentures and optionally convertible debt. It also runs an umbrella model for venture debt funds. That covers actual losses or up to 5% of pooled investment, whichever is lower, within the ceiling of INR 20 crore per borrower.
Government debt is underwritten on a machine and three years of accounts. Venture debt is underwritten on the round you just closed.
A credit guarantee is not a loan
This is the most common misreading of CGSS, and it is worth being blunt about. The scheme gives you no money. It gives your lender cover against your default, which is what lets a bank lend to a company with nothing to pledge.
The cover is 85% of the amount in default on a facility up to INR 10 crore, and 75% above that, capped at INR 20 crore per borrower. It pays the lender. Your obligation to repay is unchanged, and a default is still a default on your record.
The route is a lender's route, not a portal's. You need DPIIT recognition first. A registered member institution, which may be a bank, an eligible NBFC or a -registered fund, then confirms your eligibility and sanctions collateral-free credit. The institution applies to NCGTC for the cover.
It is not free either. The annual guarantee fee is 2% a year of the guaranteed amount, cut to 1% for startups in the 27 notified champion sectors. That is cheaper than collateral you do not have, which is the whole point of the instrument.
So which one should you ask for?
- Buying plant and machinery, with three years of filed accounts. SMILE or SMILE Equipment Finance. The asset is the reason the loan exists, and the equipment quotation is most of the appraisal.
- A first enterprise, promoted by an SC, ST or woman entrepreneur. Stand-Up India, at INR 10 lakh to INR 1 crore, over seven years with a moratorium of up to 18 months.
- No collateral, DPIIT recognised, and you need bank debt. Talk to your lender about CGSS cover rather than to a scheme portal. The application that matters is the credit application.
- A round just closed and you need the money this quarter. That is venture debt's case, and no government route will beat it on speed.
One caveat on Stand-Up India before you plan around it. The department's own page states a scheme period running to 31 March 2025, and a revamped version with a higher limit has been reported since. The register models the established scheme as the portal presents it, so confirm the current limit and end date with the bank.
If you are choosing between instruments rather than between lenders, the chooser runs the same filter across all ten families in the register.
Frequently asked questions
Is a soft loan the same as a grant?
No, it is repayable. Under SMILE the soft loan sits as quasi-equity for three years and then converts to a secured term loan. It starts out looking like patient capital and ends up looking like debt, because that is what it is.
Can I use a government loan to clear an existing one?
Not under SMILE, which bars using the facility to repay earlier or existing loans. Read the use-of-funds clause in any sanction before assuming otherwise, because these clauses are usually specific about what the money is for.
If CGSS covers my loan, am I off the hook when I default?
No. The cover accrues to the member institution that lent to you, not to you. Your repayment obligation, and the consequences of defaulting on it, are what they would have been without the guarantee.
How fast is a government loan?
It moves at the speed of the lender's credit process, and the register publishes no turnaround for any of these schemes. What can be said is that it is an appraisal rather than a cohort, so nothing has to open before you can start.
Do I need DPIIT recognition to borrow?
For CGSS, yes, and it is the gating requirement. SMILE and SMILE Equipment Finance ask instead for Udyam and GST registration and a three-year record. Stand-Up India turns on the promoter's category and on the enterprise being a first one.
General guidance, current as at September 2026. Scheme ceilings, tenors and fees change, and the sanction letter your lender issues beats anything written here. If you want the choice between these routes worked through against your own numbers, our grants and schemes work covers it, and it is CS Manavi Arora's desk.
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About the author
Lead - Company Secretarial, Compliance & Fundraise Advisory
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