Establishing a new business is a difficult task that needs a lot of resources, such as money, labour, and time. Due to a variety of issues, including a lack of collateral, a lack of credit history, or a lack of financial resources, many entrepreneurs in India find it difficult to obtain finance for their enterprises. To offer qualifying entrepreneurs collateral-free funding, the government-backed Credit Guarantee Fund for Startups (CGFS) was established in 2021. We'll go through the CGFS's main characteristics and how it might help startups in India in this blog.
What is the Credit Guarantee Fund for Startups?
The Government of India created the Credit Guarantee Fund for Startups (CGFS) programme to offer qualifying entrepreneurs collateral-free credit. The National Credit Guarantee Trustee Corporation (NCGTC), a division of the Small Industries Development Bank of India, is in charge of overseeing the programme (SIDBI). The program's goal is to make it possible for businesses to obtain finance without having to offer any collateral or third-party guarantees.
Under the programme, qualified businesses can obtain credit from a variety of lenders, such as scheduled commercial banks, non-banking financial organizations (NBFCs), regional rural banks (RRBs), and small financing banks, for amounts ranging from INR 10 lakh to INR 50 lakh (SFBs). Working capital loans as well as term loans are included in the programme.
To be eligible for the CGFS, a startup must meet the following criteria:
The startup should have been in operation for less than five years from the date of incorporation.
The startup should have a turnover of less than INR 25 crore in the previous financial year.
The startup should not have defaulted on any loans or credit facilities in the past.
Benefits of the Credit Guarantee Fund for Startups
The CGFS offers several benefits to eligible startups in India, including:
Collateral-Free Credit: The CGFS offers startups collateral-free credit, which is one of its many advantages. As a result, companies can obtain financing without having to put up any collateral. For entrepreneurs without any assets to use as collateral, this is very advantageous.
Lower Interest Rates: Loans made through the CGFS have interest rates that are considerably less than those of standard loans. As a result, startups can return the loans more easily and without suffering a heavy financial strain.
Greater Access to Funding: Startups that do not have a credit history or limited financial resources can also avail of credit under the CGFS. This opens up opportunities for more startups to access funding and grow their businesses.
Simplified Application Process: Loan applications under the CGFS are processed in a streamlined and reasonably simple manner. Online loan applications are available for startups, and the procedure can be finished quickly.
Positive Impact on the Startup Ecosystem: The startup ecosystem in India is anticipated to benefit from the CGFS. The programme will encourage more entrepreneurs to launch their enterprises and support the expansion of the Indian economy by making it easier for more startups to get capital.
The Government of India has launched a key effort called the Credit Guarantee Fund for Startups to assist startups and encourage entrepreneurship in the nation. The programme gives qualifying entrepreneurs collateral-free credit and a number of advantages, such as cheaper interest rates, a more straightforward application process, and easier access to finance. The CGFS is anticipated to have a favorable effect on the Indian startup ecosystem and contribute to the expansion of the Indian economy by allowing more startups to obtain capital. Entrepreneurs who are eligible for the programme should think about applying for credit to expand their operations.
To start a new business is easy, but to make it successful is difficult . So For success, choose the best." Be compliant and proactive from the beginning and choose NEUSOURCE as your guidance partner.