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Yes, a startup can obtain working capital loan from banks for stocking inventory or providing
credit to customers. Banks will try to assess the working capital requirement of a business based
on the projection provided and take a conservative approach to lending working capital funds.

Can startups get bank loan without any collateral security?
The Credit Guarantee fund Trust Scheme for Micro, Small and Medium Enterprises (CGTMSE
Scheme) provides a framework for the Banks to extend upto Rs.1 crore of loan without any
collateral security toward term loan and working capital requirements of a business (NOT for
marketing or technology development). Therefore, startups that require capital assets or
inventory can utilize the CGTMSE scheme to obtain collateral fee loans from bank. Loans under
CGTMSE schemes are provided by the Banks very selectively for very deserving Entrepreneurs
who exhibit very good financial and managerial acumen. Therefore, only a very few startups
obtain funding from banks under the CGTMSE scheme to start their operations.

Are there any specific loans or schemes for startups?
Yes, many banks and financial institutions offer schemes aimed at startups. For instance, SIDBI
offers “Growth Capital & Equity Assistance” for SMEs that require capital for growth. The funds
from SIDBIs “Growth Capital & Equity Assistance” scheme can be used for marketing, brand
building, creation of distribution network, technical know-how, R&D and software purchase.
SIDBI also offers the SIDBI Revolving Fund for Technology Innovation-(SRIJAN Scheme)
which provides financial assistance to MSMEs towards development, up scaling, demonstration
and commercialization of innovative technology based projects. The assistance is given in the
form of early stage “debt” funding on softer terms for development, demonstration and
commercialization of new innovations in emerging technological areas, un-proven technologies,
new products, process, etc. which have not been successfully commercialized so far. Maximum
assistance is generally not more than Rs. 1 crore per project. Interest rate would be as approved
by the Project Approval Committee (PAC) (not be more than 5% p.a.).

Loans NOT Approved under CGTMSE Scheme
Some of the credit assistance that will not be eligible for cover under CGTMSE are credit
facilities granted to any borrower, who has availed himself of any other credit facility covered
under this scheme and where the lending institution has invoked the guarantee provided by the
Trust or has not repaid any portion of the amount due to the Trust or by reason of any default on
the part of the borrower in respect of that credit facility. Further, any credit facility which has
been sanctioned by the lending institution against collateral security and/or third party guarantee
is also not eligible for cover under the CGTMSE scheme. Finally, any credit facility which has
been sanctioned by the lending institution with interest rate more than 3% over the Prime
Lending Rate (PLR) of the lending institution is not eligible for cover under the CGTMSE
scheme.

Obtaining Loan under CGTMSE Scheme

To obtain a loan under the CGTMSE Scheme, the borrower must approach one of the CGTMSE
Member Lending Institutions and apply for credit under the scheme. The lending institution shall
evaluate credit applications by using prudent banking judgement and shall use their business
discretion / due diligence in selecting commercially viable proposals and conduct the account(s)
of the borrowers with normal banking prudence. The lending institution shall ensure that the
guarantee claim in respect of the credit facility and borrower is lodged with the Trust in the form
and in the manner and within such time as may be specified by the Trust in this behalf and that
there shall not be any delay on its part to notify the default in the borrowers account which shall
result in the Trust facing higher guarantee claims.

CGTMSE Member Lending Institutions



Allahabad Bank
Andhra Bank



Axis Bank Ltd.



Bank of India



Bank of Maharashtra



Canara Bank



Central Bank of India



City Union Bank



Corporation Bank



Dena Bank



Deutsche Bank



Export Import Bank of India



HDFC Bank Ltd.



ICICI Bank Ltd.



IDBI Bank Ltd.



Indian Bank



Indian Overseas Bank



IndusInd Bank Ltd.



ING Vysya Bank Ltd.



Kotak Mahindra Bank Ltd.



Lakshmi Vilas Bank



Oriental Bank of Commerce



Punjab & Sind Bank



Punjab National Bank



Small Industries Development Bank of India



Standard Chartered Bank



State Bank of Bikaner & Jaipur



State Bank of Hyderabad



State Bank of India



State of Mysore



State Bank of Patiala



State Bank of Travancore



Syndicate Bank



TamilNadu Mercantile Bank Ltd.



The Federal Bank Ltd.



The Karur Vysya Bank Ltd.



The South Indian Bank Ltd.



The Tamil Nadu Industrial Investment Corporation Ltd.



UCO Bank



Union Bank of India



United Bank of India



Vijaya Bank



Yes Bank

For a more comprehensive list of CGTMSE Member Lending Institutions, click here.
To start a business or to know more about collateral free loan, visit IndiaFilings.com

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