Collateral-Free Business Loans in India
How the RBI mandate, India’s credit guarantee trusts and four government schemes let businesses borrow from ₹50,000 to ₹20 crore without pledging a single asset.
Credit that rests on performance, not property
A collateral-free business loan is a credit facility where the borrower does not pledge any physical or financial asset as security. No property. No land. No machinery. No gold. If the borrower defaults, the lender’s recovery does not depend on selling the borrower’s assets.
A secured loan works differently: the lender holds a claim over something the borrower owns. In an unsecured loan, the lender’s confidence comes from the borrower’s financial behaviour, business performance and, in most government-backed cases, a partial guarantee from a third-party trust.
The term covers a wide range of ticket sizes, from ₹50,000 under MUDRA to ₹20 crore under the startup credit guarantee scheme. The rules change with the lender type and the scheme involved. The principle stays the same.
- Borrower pledges
- Lender relies on
- If default occurs
Property does not need to change hands for credit to move.
RBI’s mandate: no collateral up to ₹20 lakh
The Reserve Bank of India has directed banks not to require collateral for loans up to ₹20 lakh to micro and small enterprises, effective April 1, 2026. This includes loans to units under the Prime Minister’s Employment Generation Programme (PMEGP). RBI Governor Sanjay Malhotra described the policy as a step to widen access to formal credit and support entrepreneurial activity in this segment.
- Banks may extend up to ₹25 lakh without collateral based on the unit’s financial track record.
- PMEGP units are included in the mandate.
- Borrowers may voluntarily pledge gold or silver.
- Medium enterprises are outside the ₹20 lakh directive.
Does the mandate apply to your unit?
Drag the sliders to match your Udyam figures and the loan you need. The verdict updates as you move.
MSME classification, effective April 2025
The category recorded on your Udyam registration at the time of applying decides which rules apply. A unit must stay within both the investment and the turnover limit of a category.
Micro
Covered by the RBI ₹20 lakh mandate
Small
Covered by the RBI ₹20 lakh mandate
Medium
Outside the RBI ₹20 lakh mandate
Every MSME must register on the Udyam Registration Portal and hold an Udyam Registration Certificate (URC). Banks use the URC to classify the loan under priority sector lending.
The credit guarantee architecture
The RBI mandate stops banks from asking for collateral, but the lending risk does not disappear. Government-backed credit guarantee schemes absorb part of that risk by compensating lenders for a share of losses when a borrower defaults. That is what allows banks to lend without property on the table.
Managed by SIDBI and the Ministry of MSME. Focused on micro and small enterprises across manufacturing, services and trading.
Administers separate trusts for different borrower groups. Tap one to see who it serves.
Collateral-free does not mean automatic approval. The collateral requirement is waived, but lenders still assess every proposal and can decline it on creditworthiness.
Four schemes, four borrower profiles
Pick a scheme to see its parameters, then use the tool beside it to test your own numbers.
Credit Guarantee Fund Trust for Micro and Small Enterprises
- Set up
- 2000, by the Ministry of MSME and SIDBI
- Sectors
- Manufacturing, services and trading. Retail and wholesale trade added in 2021.
- Cap per borrower
- ₹10 crore, up from ₹5 crore (revised April 1, 2025)
- Maximum credit facility
- ₹10 crore per eligible borrower under CGS-I, from April 1, 2025
- Guarantee cover
- 75% to 85% of the facility, by borrower category and loan size
- Type of instrument
- Venture debt, working capital, subordinated/mezzanine debt, debentures, and optionally convertible debt
How much can be covered, by lender
Pradhan Mantri MUDRA Yojana
- Administered by
- MUDRA (Micro Units Development and Refinance Agency), a SIDBI subsidiary
- Guarantee
- Credit Guarantee Fund for Micro Units (CGFMU), managed by NCGTC
- Covers
- Non-farm micro enterprises in manufacturing, services and trading, plus agriculture-allied activity such as dairy, poultry and beekeeping
- Lenders
- Public and private banks, RRBs, Small Finance Banks, NBFCs and MFIs. Sanction is at the lender’s discretion.
- Rates
- Subsidised and linked to base rates. No single fixed rate; varies by lender and category.
Which MUDRA category fits your loan?
Credit Guarantee Scheme for Startups
- Timeline
- Launched in 2022, revised in 2025
- Maximum cover
- ₹20 crore per borrower
- Debt types
- Venture debt and term loans, among others
- Lenders
- Scheduled banks, eligible NBFCs and SEBI-registered AIFs
- Eligibility
- Valid DPIIT recognition is mandatory
- Note
- Not a grant or subsidy. The loan is repaid in full; the guarantee protects the lender.
See how much of your loan is guaranteed
Stand-Up India Scheme
- Administered by
- Department of Financial Services, Ministry of Finance, with SIDBI and NCGTC
- For
- SC/ST and women entrepreneurs setting up new greenfield enterprises
- Guarantee
- Credit Guarantee Fund for Stand-Up India (CGFSI), managed by NCGTC
- Loan size
- ₹10 lakh to ₹1 crore, composite term loan and working capital, up to 75% of project cost
- Interest
- Lowest applicable rate for the category, capped at MCLR + 3% + tenor premium
- Repayment
- Up to 7 years, with an 18-month moratorium
- Bank obligation
- Each scheduled commercial bank branch must sanction at least one qualifying loan to an SC/ST borrower and one to a woman borrower every financial year
- Collateral
- Banks cannot demand property or third-party guarantees on qualifying loans up to ₹1 crore
Current limit vs expected revamp
The original scheme ran until this date.
Finance Minister Nirmala Sitharaman announced a revamped version following review by NITI Aayog and the departments involved.
The revised scheme is expected to double the loan limit to ₹2 crore. It was still being finalised at the time of writing.
Prime Minister Street Vendor’s AtmaNirbhar Nidhi
- Set up
- 2020, by the Ministry of Housing and Urban Affairs (MoHUA)
- Target
- Street vendors and hawkers
- Purpose
- Collateral-free working capital loans to help street vendors finance their businesses
- Loan amount
- ₹15,000 → ₹25,000 → ₹50,000, in three progressive tranches based on successful repayment
- Collateral
- No collateral required
- Interest subsidy
- 7% p.a. on timely repayment
- Repayment
- 1st tranche: 12 months
2nd tranche: 18 months
3rd tranche: 36 months
How the loan grows with repayment
The collateral-free ticket map
Each bar shows the loan range a route covers, on a scale from ₹10,000 to ₹20 crore. Hover or drag across the chart to see which routes are open at any amount.
Which route fits your business?
Answer two questions. The finder maps your profile to the schemes described above.
Raising more than these schemes allow?
Leverest arranges structured debt for SMEs, mid-market companies and real estate developers across PSU banks, private banks, NBFCs and AIFs.