Business Insurance: How These Government Schemes Help Secure Your Startup or MSME

Are you a startup founder or MSME owner worried about what happens if your business hits a rough patch?

You're not alone. Running a business is risky but the good news is, you don’t have to shoulder that risk alone. The Government of India has launched several business insurance-linked schemes designed specifically to support startups and small businesses. These policies don’t just offer financial protection. They give you the confidence to grow without fear.

Let’s decode how these schemes actually work.

The 3 Core Pillars of Business Insurance for Startups

Business insurance through government schemes is built around three main objectives:

1. Credit Guarantee Schemes

Imagine getting a business loan without collateral. That’s what these schemes enable.

Instead of making you put your assets on the line, the government backs your loan with a guarantee reducing the risk for banks and easing stress for you.

Here are three major credit guarantee programs:

CGTMSE Scheme (Credit Guarantee Fund Trust for Micro and Small Enterprises)

• No collateral needed up to ₹2 Cr.
• Covers 75–85% of the loan amount.
• Reduces lender hesitation for new or small businesses.

CGFMU (Credit Guarantee Fund for Micro Units)

• Specially for micro-loans under PMMY (like Mudra loans).
• Encourages easy access to credit for small vendors, traders, or artisans.

CGSS (Credit Guarantee Scheme for Startups)

• Tailored for DPIIT-recognised startups.
• Encourages innovative businesses by reducing credit risk for lenders.

Many of these loans come with 15%+ subsidy potential. StartupFlora can guide you on exactly how to access these benefits.

2. Trade Credit Insurance

What if your customer ghosts you after delivery?

That’s where Trade Credit Insurance steps in particularly for exporters and B2B businesses.

ECGC-NIRVIK Scheme

• Covers up to 90% of export losses.
• Helps you recover when buyers default or delay payments.
• Bonus: Faster access to working capital from banks due to insurance coverage.

Whether you’re shipping textiles to Europe or software to Singapore, this protection gives you peace of mind to scale globally.

3. Risk-Sharing Schemes

Even if you can't repay fully some schemes ensure you’re not alone.

These schemes absorb part of the financial blow when business gets tough:

CGSSD (Credit Guarantee Scheme for Subordinate Debt)

• Helps stressed MSMEs get fresh funding.
• Government guarantees part of the loan if your business is struggling to repay.

FPO Guarantee Schemes

• Designed for Farmer Praoducer Organizations (FPOs).
• Encourages agri-businesses by covering lending risks to farmer groups.

PMFBY (Pradhan Mantri Fasal Bima Yojana)

• While not a business insurance in the traditional sense, it’s crucial for agri-entrepreneurs.
• Offers crop insurance for climate or pest-related losses.

Together, these schemes reduce risk, unlock funding, and offer stability even in uncertain times.

GST and Insurance: Did You Know?

Life insurance for business owners under certain schemes is GST-free (0%) especially when bundled as part of financial support programs. Ask us how to use this tax edge in your business protection plan.

How StartupFlora Guides You Get Covered?

Don’t know which scheme fits your stage, sector, or goals?

StartupFlora’s experts:

• Match your business with the right government-backed insurance plan.
• Guidance in application, documentation, and eligibility.
• Offer ongoing advice so you’re protected and prepared.

FAQs: Business Insurance Schemes for Startups & MSMEs

Q1. What is the best business insurance scheme for new startups?
If you're DPIIT-recognised, CGSS is tailored for you.

Q2. Can I get insurance for my export-based business?
Yes—ECGC’s NIRVIK scheme offers up to 90% coverage for export losses.

Q3. What if I’ve already taken a loan but can’t repay?
CGSSD and similar risk-sharing schemes can partially protect you and help with restructuring.

Q4. Do I need collateral for a credit-guaranteed loan?
In most cases like CGTMSE, no collateral is needed up to ₹2 Cr.

Ready to Secure Your Business?

Every smart founder plans not just for growth but for uncertainty too.
If you're serious about building a protected, fundable, and fearless business...