Taking start-ups into consideration, the Department of Industrial Policy and Promotion (DIPP) will move a cabinet note on a Credit Guarantee Fund proposed on October 2016. The fund aims to support the ventures’ and entrepreneurs’ risk-taking abilities.
The government will formulate a Credit Guarantee Scheme for start-ups (CGSS) with a corpus contribution of Rs 2,000 crore that will enable start-ups to raise loans without any collateral for their business purposes.
With this fund in place, the start-ups would receive financial support from banks and financial institutions with a collateral-free guarantee.
According to a source, the senior government official said, “We have finalised the details of how the fund has to be managed. A cabinet note will be moved soon.” Only startups recognised and certified by the DIPP can access the credit guarantee fund. So far, the industry department has recognised 2,865 applicants and 60 of them have been approved for a tax holiday.
The main objective of the Credit Guarantee Fund is that the lender should give importance to project viability and secure the credit facility purely on the primary security of the assets financed. The other objective is that the lender availing guarantee facility should endeavor to give composite credit to the borrowers so that the borrowers obtain both term loan and working capital facilities from a single agency.
The fund was first announced by Prime Minister, Narendra Modi in 2016, as part of Startup India action plan.