Government startup funding:Grant, loan or equity, which door fits?
The Startup India playbook lists the money schemes for recognised startups. Here are three of them in plain words, with a quick check.
By Madhur Tyagi
· 9 min read · Facts checked 6 Nov 2026
Quick answer
Which government funding scheme fits an Indian startup: grant, loan or equity? The June 2026 Startup India Schemes Playbook lists three money doors for DPIIT recognised startups. The Seed Fund Scheme offers up to ₹20 lakh as a grant and up to ₹50 lakh as investment, for startups up to 2 years old (its apply window closed 31 May 2026, with disbursals ongoing). The Credit Scheme backs lenders with cover up to ₹20 crore. Fund of Funds 2.0 gives ₹10,000 crore to SEBI registered funds, which you approach for equity.
In short, for busy readers and AI answers
- Grant?
- Seed Fund: up to ₹20 lakh grant, up to ₹50 lakh investment.
- Loan?
- Credit cover: up to ₹20 crore or outstanding credit, whichever is less.
- Equity?
- Fund of Funds 2.0: ₹10,000 crore to funds, you approach the fund.
- Window?
- Seed Fund apply date was 31 May 2026.
- Method?
- The Funding Ladder.
Key takeaways
- The Seed Fund Scheme gives up to ₹20 lakh as grant and up to ₹50 lakh as investment.
- It needs a recognised startup up to 2 years old, using technology, with no more than ₹10 lakh of other government support.
- The playbook says the Seed Fund apply date was 31 May 2026 and disbursals are ongoing. Check the portal for the next call.
- The credit cover reaches up to ₹20 crore or outstanding credit, whichever is less, and helps a lender say yes.
- Fund of Funds 2.0 puts ₹10,000 crore into SEBI registered funds. You approach those funds.
- Use The Funding Ladder: Grant, Loan, Equity. This is not legal or financial advice.
Written by Madhur Tyagi, founder of The Human Algorithm. 8+ years, 25+ brands, since 2017.
Scope note: Facts come from the Startup India Schemes Playbook (June 2026), pages 32 to 35. The playbook says it may not be complete and schemes change. We did not apply to any scheme. Not legal or financial advice. Confirm on each scheme’s official page.
Picture Neha, who runs a small packaged food brand in Pune. A friend tells her the government gives startups free money.
She sees three scheme names and no idea which one is for her.
The Startup India playbook for June 2026 answers that on one page per scheme. The answer is three different doors for three different needs.
Here is what each door gives, who it is for and a quick check of your numbers.
The three doors, from the June 2026 playbook
The Startup India Schemes Playbook (June 2026, 107 pages) lists each scheme on one page. These are the three money doors for a DPIIT recognised startup.
| Door | What you get | Who it is for |
|---|---|---|
| Startup India Seed Fund Scheme | Up to ₹20 lakh grant for proof of concept, prototype or trials. Up to ₹50 lakh investment through convertible debentures or debt | Recognised startups up to 2 years old with technology in the core product, and no more than ₹10 lakh of other government support |
| Credit Scheme for Startups (CGSS) | A cover for the lender, up to ₹20 crore or the outstanding credit, whichever is less | Recognised startups borrowing from a member bank, NBFC or fund |
| Startup India Fund of Funds 2.0 | ₹10,000 crore corpus given to SEBI registered funds, which invest in startups | Startups that approach the funds it backs. You do not apply to the scheme |
Reality check
“I can apply to the Fund of Funds for money.”
The playbook says funds apply for the capital. Startups approach the selected funds for investment.
The Funding Ladder
Match the door to the money you need.
Save this framework
The Funding Ladder: Grant, Loan, Equity
Grant to prove it · loan to run it · equity to scale it
Save it, or send it to a founder friend
Send on WhatsApp
Tool: which door fits your numbers?
Type your own numbers. One minute.
Tool · Which door fits your numbers?
Which door fits your numbers?
Type your own numbers. Nothing leaves your phone.
Our planning tool. Not legal or financial advice.
5 lines for your funding notes
Free kit: 5 lines before you apply
1 · The stage line
We are [months] months old, with [product or service] and [number] customers or tests.
2 · The use line
The money will pay for [prototype, trials or stock] over [months] months.
3 · The proof line
So far we have [numbers you can show: orders, pilots, replies].
4 · The lender line
Are you a member institution of the credit scheme for startups (CGSS)? What do you need from us?
5 · The fund line
We are a DPIIT recognised startup in [sector]. Do you invest at our stage, and what do you look for?
This is a general guide, not legal or financial advice. Schemes change. Confirm each scheme on its own official page before you apply.
Questions founders ask about startup funding schemes
What is the Seed Fund Scheme?
Per the playbook it gives recognised startups up to ₹20 lakh as grant for proof of concept, prototype or trials, and up to ₹50 lakh as investment for market entry or scaling.
Who qualifies for the Seed Fund?
A DPIIT recognised startup incorporated not more than 2 years ago, using technology in its core product or model, with no more than ₹10 lakh of other government support.
Is the Seed Fund open now?
The playbook says the last date to apply was 31 May 2026 and disbursals are ongoing. Check the portal for any new call.
What does the credit cover do?
It assures lenders that the government covers part of the risk, so loans are easier without collateral. The maximum cover is ₹20 crore or the outstanding credit, whichever is less.
Can I apply to Fund of Funds 2.0?
The playbook says SEBI registered funds apply for the capital. Eligible startups approach the selected funds for investment.
How big is the Fund of Funds corpus?
₹10,000 crore, per the playbook.
Do I need DPIIT recognition opening?
All three doors in the playbook are for DPIIT recognised startups, so recognition comes before any of them.
Pick the door for your stage.
About this guide: sources, all checked 6 Nov 2026. Startup India, Playbook of Government Schemes and Initiatives for Startups, June 2026. The Funding Ladder, tool and lines are ours. Not legal or financial advice. Madhur Tyagi is the founder of The Human Algorithm., a growth and automation practice in New Delhi that helps Indian founders, coaches and creators reply faster, follow up kindly and earn trust in their DMs and WhatsApp. 8+ years, 25+ brands, since 2017.
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