CGSS for Startups: Cover, Eligibility and How to Apply
Reviewed by: WeCredit Research Team
The Credit Guarantee Scheme for Startups (CGSS) does not lend money. It guarantees loans that approved banks, NBFCs and funds give to DPIIT-recognised startups, so the lender can fund you without asking for collateral. The guarantee ceiling is Rs. 20 crore per borrower, raised from Rs. 10 crore in May 2025.
Quick answer: you cannot apply to CGSS directly. First get DPIIT recognition, then ask a member lender for a collateral-free loan, either on the JanSamarth portal or at a branch. The lender decides whether to lend and handles the guarantee cover under the scheme. WeCredit does not sanction government scheme loans. Confirm details on Startup India and with your lender before you apply.
CGSS at a Glance
| Item | What the official sources say |
|---|---|
| What it is | A credit guarantee scheme. It backs loans given to startups. It is not a loan, not a subsidy and not a grant |
| Who it is for | Startups recognised by DPIIT that are not in default and not classed as an NPA under RBI rules |
| Guarantee ceiling | Rs. 20 crore per eligible borrower (earlier Rs. 10 crore) |
| Cover on default | 85% of the amount in default for loans up to Rs. 10 crore, 75% above Rs. 10 crore (transaction-based guarantee) |
| Collateral | Collateral-free debt for working capital, term loans and venture debt |
| Annual guarantee fee | 1% a year for startups in the 27 Champion Sectors, down from 2% a year |
| Run by | National Credit Guarantee Trustee Company (NCGTC) |
| Status | Notified 6 October 2022 and expanded on 9 May 2025 |
What CGSS Actually Does
A startup often has ideas, customers and revenue growth but no property to pledge. Banks and NBFCs usually want collateral for a loan of that kind. CGSS fills that gap. The member lender gives you a loan without asking for security. The guarantee covers a share of the amount in default, 85% or 75% depending on the loan size.
Two things follow from this. First, the guarantee protects the lender, not you. You are still expected to repay the loan in full. Second, the guarantee does not promise approval. The lender still checks your business, your cash flows and your repayment capacity.
The scheme has two guarantee types. In the transaction-based type, the guarantee attaches to an individual loan. In the umbrella-based type, a fund or lender gets cover on a pool of investments, up to 5% of the pooled investment or the actual losses, whichever is lower, with the same Rs. 20 crore cap per borrower.
Who Is Eligible
- The business must be a startup recognised by the Department for Promotion of Industry and Internal Trade (DPIIT). The Startup India page states that a startup needs DPIIT recognition to use the scheme.
- The startup must not be in default to any lending institution.
- The startup must not be classed as a non-performing asset (NPA) under RBI guidelines.
- The member institution must certify that you are eligible for the guarantee.
- The loan must come from a member institution: scheduled commercial banks and financial institutions, RBI-registered NBFCs with a BBB+ rating and at least Rs. 100 crore net worth, or SEBI-registered Alternative Investment Funds.
DPIIT recognition: the quick criteria
Because recognition is the gate, check it first. As listed on the Startup India recognition page, the entity must be a private limited company, a partnership firm, a limited liability partnership or a cooperative society. It must be within 10 years of incorporation (20 years for DeepTech startups), have turnover below Rs. 200 crore in any previous financial year (Rs. 300 crore for DeepTech), and work toward innovation or improvement of products, services or processes with potential to create jobs or wealth. Recognition is applied for on the National Single Window System at nsws.gov.in.
How Much Can You Get Covered?
The scheme caps the guarantee, not the loan itself. The lender decides your loan amount based on appraisal. The guarantee then covers a share of any default, up to Rs. 20 crore per borrower.
| Loan size | Guarantee on the amount in default |
|---|---|
| Up to Rs. 10 crore | 85% |
| Above Rs. 10 crore | 75% |
Worked example
Illustration only, using round numbers. A recognised startup takes a Rs. 2 crore collateral-free term loan. Suppose the loan defaults with Rs. 1.2 crore outstanding. Because the loan is under Rs. 10 crore, the guarantee applies at 85% of the amount in default, which is Rs. 1.02 crore. The remaining Rs. 18 lakh is not covered by the guarantee. How the lender recovers any balance depends on its own terms, and the guarantee is meant to support the lender rather than release you from the debt. Your actual terms depend on the lender and the sanction letter.
What Does the Guarantee Cost?
The annual guarantee fee for startups in the 27 Champion Sectors was cut to 1% a year from 2% a year in the May 2025 expansion. The Champion Sectors are identified by the government under Make in India. The fee for other sectors, who bears it, and how it is charged on your loan can differ. Ask the lender for the fee in writing before you sign, and check the notification on the NCGTC website.
Documents Lenders Usually Ask For
You apply for the loan, not to the scheme, so the lender sets the list. The documents below are what member lenders commonly request for a startup loan. Your lender may ask for more or fewer.
- DPIIT recognition certificate (mandatory for this scheme)
- Certificate of incorporation, or the registered partnership or LLP deed
- PAN of the entity and PAN and Aadhaar of directors or partners
- Memorandum and articles of association, or the LLP agreement
- Business plan with revenue projections for the loan period
- Latest financial statements, bank statements and, where available, GST returns
- Details of existing loans and repayment track record
- Details of funding raised, such as investors and the shareholding pattern
- Address proof of the registered office
How to Apply: Step by Step
- Check that your startup meets the DPIIT criteria and apply for recognition at nsws.gov.in if you do not yet have a certificate.
- Confirm you are not in default and not classed as an NPA with any lender.
- Decide the facility you need: working capital, term loan or venture debt.
- Apply through the JanSamarth portal or approach a member institution branch directly.
- Submit your documents. The lender appraises your business and certifies whether you are eligible for the guarantee.
- If the lender sanctions the loan, it arranges the guarantee cover under the scheme. Read the sanction letter for the rate, the fee and the confirmation that no collateral is taken.
- Accept the loan and repay on schedule.
Is CGSS Right for You? A Checklist
- I hold a valid DPIIT recognition certificate.
- My entity is within the age and turnover limits for recognition.
- I am not in default with any bank, NBFC or fund.
- I need collateral-free debt, not equity.
- I can show revenue or a credible plan to repay the loan.
- My lender is a member institution that offers CGSS cover.
If you tick all six, ask your lender about CGSS cover. If you miss the first two, fix them before you apply. If you miss the third, clear the default first, because the scheme covers only borrowers who are not in default.
Why a CGSS-Backed Loan Can Get Rejected
| Reason | What to do |
|---|---|
| No DPIIT recognition | Apply on nsws.gov.in and reapply once you have the certificate |
| Default or NPA status with an existing lender | Clear or regularise the account, then ask the lender to review |
| Lender is not a member institution | Move to a scheduled bank, an eligible NBFC or a listed AIF that offers the cover |
| Lender does not certify eligibility | Ask the lender in writing why, then try another member lender |
| Weak cash flow or projections | Rework the business plan and show a clear repayment source. See why business loans get rejected |
| Documents incomplete or mismatched | Match names, PAN and registration details across every document |
CGSS Compared With Related Schemes
| CGSS | CGTMSE | Stand-Up India | |
|---|---|---|---|
| What it is | Guarantee for loans to startups | Guarantee for loans to micro and small enterprises | Bank loan scheme for SC, ST and women entrepreneurs |
| Who qualifies | DPIIT-recognised startups | Micro and small enterprises | SC, ST and women first-time entrepreneurs |
| Size | Guarantee up to Rs. 20 crore per borrower | Guarantee ceiling Rs. 10 crore per borrower | Loan of Rs. 10 lakh to Rs. 1 crore |
| Where you apply | A member lender, not the scheme | A member lender, not the scheme | See the Stand-Up India guide |
Read the detailed guides: CGTMSE explained and Stand-Up India scheme. A startup that is also a micro or small enterprise should ask the lender which guarantee fits better.
Timeline
| Date | Event |
|---|---|
| 6 October 2022 | Scheme notified |
| 9 May 2025 | Expansion notified: ceiling raised from Rs. 10 crore to Rs. 20 crore and fee cut to 1% for Champion Sector startups |
What Lenders Look at Before Certifying a Startup
Eligibility under the scheme is only the first check. The member institution then does its own credit appraisal. Expect questions about how long the startup has been trading, whether revenue is recurring, how much cash the business burns each month, who the founders are and whether existing loans are serviced on time. A clear business plan and clean bank statements help more than a long pitch.
It also helps to match the facility to the need. Working capital loans suit businesses with steady sales that need cash for stock or salaries. Term loans suit equipment or fit-out costs. Venture debt suits startups that have already raised equity and want to extend their runway without further dilution. Tell the lender which one you want and why, because the answer shapes the appraisal.
Common Mistakes
- Looking for a CGSS application form. You apply for the loan, not to the scheme.
- Applying before you have DPIIT recognition.
- Assuming the guarantee means approval. The lender still appraises you.
- Assuming the guarantee clears your debt. It only compensates the lender.
- Not asking who pays the guarantee fee and how it is charged.
- Paying an agent to get the guarantee. Use official channels and your lender. See our guide to applying for MSME loan schemes online.
Frequently Asked Questions
What is CGSS?
It is a government credit guarantee scheme that backs collateral-free loans given by member institutions to DPIIT-recognised startups. NCGTC administers it.
What is the maximum guarantee under CGSS?
Rs. 20 crore per eligible borrower. It was Rs. 10 crore before the May 2025 expansion.
Do I need DPIIT recognition?
Yes. The Startup India page says a startup needs DPIIT recognition to avail the benefits.
Can I apply for CGSS directly?
No. You apply for a loan through the JanSamarth portal or at a member institution. The lender handles the guarantee cover under the scheme.
What does the guarantee cost?
The annual guarantee fee is 1% a year for startups in the 27 Champion Sectors, reduced from 2%. Ask your lender for the rate that applies to you and who pays it.
Is the loan collateral-free?
The scheme supports collateral-free working capital, term loans and venture debt. Your lender still decides whether to sanction the loan.
Does WeCredit sanction CGSS loans?
No. WeCredit does not sanction government scheme loans. We explain how schemes work. Confirm current terms with the lender and on the official source. See our government loan schemes hub and our government business loan eligibility guide.
