To promote startups in the country for industrial growth, the government has approved a Credit Guarantee Scheme (CGSS), under which, startup companies will be able to get loans up to Rs 10 crore without any guarantee. The government has notified the scheme. The Department for Promotion of Industry and Internal Trade (DPIIT) said in a statement that loans sanctioned on or after October 6 will be eligible for this scheme. Under this scheme, loans will be provided for a fixed period to meet the financial needs of startups. According to DPIIT spokesperson loans will be given only to those startups which fall under the definition of startup as per the notification of DPIIT or any changes made in it from time to time.
This step of the government will help the startup companies of the country in raising capital. This credit facility will not be covered under any other guarantee scheme. For this scheme, the Government of India will establish a trust or fund which will work to give guarantee for the loan managed by the board of National Credit Guarantee Trustee Company. The responsibility of the trust is to guarantee payment to the lending bank in case of default of the loan given to the startup. Its purpose is to guarantee payment in case of default in the loan given to the right borrowers: those startups will be eligible for this, which are earning stable revenue.
According to information, to get a loan the monthly statement of the startup for the last 12 months will be audited, provided such a startup should not default on any loan. Apart from this, that company should not be included in the NPA list by RBI. A Member Institution will be formed for the loan which will include banks and financial institutions. Information reveals, in the last few years, startups are getting a lot of help from the government, due to this nearly 100 startups have become unicorns so far (Startups whose valuation is one billion dollars are called unicorns). To promote the startup culture, a target has been set up to encourage more than 10,000 startups in the coming 5 to 6 years under the Genesis program.
