Government Working on Credit Guarantee and Seed Funding Schemes to Leverage Startups
The Department for Promotion of Industry and Internal Trade (DPIIT) is working on credit guarantee and seed funding schemes to support startups in the country. Startups are also urged to draw up a holistic report on issues related to ESOPs (employee stock option plans) so that it can be sent to the ministry of finance for consultations after they reported grievances concerning ESPOs.
DPIIT Secretary Guruprasad Mohapatra said, both the schemes are under inter-ministerial consultations. He said that the scheme will strengthen the banks and hence would facilitate them to lend to startups. A credit guarantee scheme would help startups acquire Capital Expenditure (Capex). Capex helps the companies to maintain existing assets and to invest in new technology.
Mohapatra said that startups face the utmost problem in acquiring funds in the ideation to the proof of concept stage. The scheme would help startups to maintain working capital and improve revenue. Some states like Gujarat and Kerala have a scheme like seed funds but on a smaller scale. With the new scheme, the Government aims to launch a pan-India scheme to help startups flourish.
The scheme would launch soon after the approval of the finance ministry and then the DPIIT, with the confirmation of the Union cabinet. The center is encouraging states to actively support budding entrepreneurs to kickstart innovative businesses. The government has already started the process of new rankings of states and UTs after the state startup ranking was declared recently.
Seed funding is different from venture capital. The scheme would support startups in their initial stages by enabling them to acquire funds from banks. Acquiring funds is often the toughest step for new ventures.The move would help brace the prototypes of the startups after idea generation and development.