For Startups: Now Collateral Free Loan Scheme From Public Sector Banks

For Startups: Now Collateral Free Loan Scheme From Public Sector Banks

Monday January 28, 2013,

3 min Read

In India, clearly one of the biggest pain point for Startups is raising funding, while most of the countries in the world are figuring out a way to support startups, let me share with you a scheme which is meant to give a boost to entrepreneurs in our country.

The Ministry of Finance has come up with a scheme to support innovative/tech based startups. Unlike any other loan scheme where banks ask for collateral, track record, revenue flow to the company, last 3 years balance sheet etc, under this scheme those are not the parameters to analyse a proposal. Under this scheme banks analyse the promoter team, investor's profile, innovative idea and revenue visibility.

USPs of the scheme:

  1. Track record is NOT mandatory (by way of revenue, asset)..if track record is there, it will be a bonus.
  2. Funding for product development. In any other scheme bankers will find it difficult to fund product development, as the success of the product is not guaranteed..
  3. Flexible payment terms..if required..say the product will generate revenue only after 1 year of investment, moratorium period can be availed (Moratorium is when borrower has to pay only interest and not principal). Post the moratorium period the principal repayment will start.
  4. Subsidised interest rates @ 12% per annum (other than CGTMSE charges which goes to credit guarantee scheme, under which the loan is covered)
  5. Loan up to Rs 1 crore: If required loan will be given up to Rs 1 crore
  6. Quick processing: This scheme comes under special cell. So the processing happens at lightening speed (provided documents are submitted on time)

Eligibility Criteria:

Collateral Free Loan is available for startup companies if they are fulfilling the below conditions;

  1. It should be a private limited company and should have SME /SSI registration
  2. Should have been funded by angel /VC investor. (Investor need not be registered with SEBI.Even individual investor is eligible)
  3. There should be a share purchase agreement and share allotment proof is mandatory
  4. Extent of financing of the project cost: 10% from promoters, 20% from investors (any angelfunds, VCs, individuals
  5. Types of loan - Term loan or working capital assistance will be provided
  6. Term loan is for a maximum period of 7 years and maximum moratorium period of 3 years
  7. Loan is covered under CGTMSE scheme (for that additional fee is payable)
  8. Expenses eligible for assistance under this scheme : Product development expenses, Purchase of machinery, tools, computers etc

If you think you fit the above criteria then do drop in your request here and we will pass it on to

SS Halcyon Investment Advisory which will work on securing the funding for you. To register for this scheme, please fill out the form below:

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