MSME loans are easily accessible and come with numerous benefits like zero collateral, government subsidy, low interest rates and high loan amounts of up to Rs.50 lakhs. The government has also offered tax discounts on MSME Loans making them the most preferred lending option for small business owners. 
Micro, Small and Medium Scale Enterprises play an important role in the Indian economy; they contribute towards the GDP as well as the large employment opportunities for people in rural and semi-urban localities of the country. The capital requirements of an MSME are many; procuring raw materials, transportation of raw materials and finished goods, electricity and water consumption, machinery and equipment, land and premises, etc. 
There are different kinds of loans available for MSMEs; they can get term loans, working capital loans or MSME loans to meet their capital needs. Among them, MSME loans are the most popular owing to their lower interest rate and other benefits. 

MSME Loans: A Snapshot

Interest Rates

Starts from 8.5% (Linked to MCLR Rates)

Loan Amount

From Rs.50,000 up to Rs.50 crores

Repayment Tenure

5 – 10 years

Loan Types

Term Loans, Working Capital Loans, Equipment Loans, Line of Credit, Bank Guarantees, Vehicle Loans

Processing Fees

0.5%  - 5%


How Are MSME Loans Different From Other Business Loans?

  • MSME loans can be availed for several purposes. The banks can customize these loans to suit your requirements. 
  • Many MSME loan schemes have government backing. For example, the PM Mudra Yojana, the CGTMSE scheme, Mahila Udyami scheme, Credit Linked Capital Subsidy Scheme (CLCSS) and many more schemes have government backing. 
  • The government-backed MSME schemes offer collateral-free loans of a certain amount which is a big relief for the start-ups and micro scale industries.
  • They help you to take care of the daily cash requirements of your business.
  • They also enable the expansion and development of your current business through acquiring new assets.
  • Enables technological upgradation of your business and thus resulting in lesser production cost and higher output.
  • Come with a very low interest rate and a comfortable repayment period.
  • You can even go for top-up loans based on your repayment history.

In What Ways Do MSME Loans Help Small Business Owners?

MSME loans can help small business owners in setting up a new business, running an already established business, or expanding your current business. An MSME loan can be utilized for the following purposes: 

  • You are buying land to start a business. 
  • You are buying a manufacturing unit. 
  • You are buying factory supplies like computers, appliances etc. 
  • You are buying raw materials to meet your company's capital requirements. 
  • You need to settle employee wages, bills, and debts.
  • You want to expand your business.
  • To meet your marketing and advertising expenses.
  • You need money for the office refurbishment.

How Can Small Business Owners Take Advantage Of MSME Loans?

MSME loans are of different kinds. You can get term loans for all purposes, or machinery loans to buy a piece of particular equipment. There are working capital loans or lines of credit to take care of day to day needs of your business. So, the business owner should list down his requirements before seeking the right kind of MSME Loan for his business. 

Banks and NBFCs also differ with their eligibility criteria to disburse MSME loans. The most common eligibility criteria to get an MSME loan are: 

Business Age

Minimum 2 years of existence, with 1 year of  making profits. 

Eligible Entities

Individuals, SMEs, MSMEs, business owners, women entrepreneurs, self-employed professionals

Business Type

MSMEs registered as Proprietorship, Partnership or Pvt. Ltd. / LLP / One Person Company

Annual Turnover

Micro Enterprises – Rs.5 crores

Small Enterprises – Rs.5 – 75 crores

Medium Enterprises – Rs.75crores – 250 crores

Collateral or Security

Based on the bank’s discretion


A few Government supported MSME Loan Products most sought after by Small Business Owners

MUDRA – Micro Units Development & Refinance Agency Ltd

  • Refinance assistance to banks and NBFCs to raise funding available for lending.
  • Subsequent lending to businesses engaged in manufacturing, trading, services, tractor financing, agriculture and allied activities, and two-wheeler loans
  • In addition to financial assistance, MUDRA empowers MSME entities through financial literacy and other social support services.
  • MUDRA has three loan schemes: Sishu loan of up to Rs. 50000, Kishore loan of up to Rs. 5,00,000, and Tarun loan of up to Rs. 10 lakh.

Credit Linked Capital Subsidy Scheme (CLCSS)

  • Enable MSME units to upgrade their technology in specific products.
  • Capital infusion of 15% for well-established and improved technologies.
  • The primary institutions for fund disbursement are SIDBI and NABARD.
  • Nine nodal banks have been appointed to participate in the scheme.

SMILE –  Make In India Initiative Development

  • Loans with a Quasi-Equity component.
  • This loan is available to new and existing MSME units in the manufacturing or service sectors that are expanding.
  • The minimum loan amount is Rs. 25 lakhs.
  • Attractive interest rates beginning at 8.36%.
  • Repayment terms of up to 120 months are available.

The Credit Guarantee Fund Scheme for MSMEs

  • This scheme allows for the application of a loan with no collateral.
  • Retail trade, educational institutions, agriculture, and Self-Help Groups (SHGs) are exempted, as are new and existing MSME units in the manufacturing or service sectors.

Obtaining seed funding, capital to sustain an already established business, or funds for expansion can be one of the most difficult aspects of running a business. An MSME loan is simple to obtain, and the entire process is painless. The documentation requirements are minimal, and the loan amount is disbursed quickly. This can be useful if you are in desperate need of money.

FAQs Why MSME Loan should Be The 1st Choice for Small Business Owners 

  1. How much loan amount can I get under MSME Loans?

MSME loan amounts range from Rs. 50,000 up to Rs.50 crores.

  1. Are there any differences between MSME and business loans?

Though both loans are available to corporations and organizations, the loan amounts and interest rates may differ slightly. MSME loans are tailored to the needs of small businesses.

  1. Are MSME loans available online?

Yes, in recent times, there are many MSME loans that can be applied online. 

  1. Do banks check my credit score when processing an MSME loan?

Yes, the bank has the authority to obtain your credit score from approved credit reporting agencies in order to assess your creditworthiness when processing your MSME loan application.

  1. What is the time frame taken by banks and NBFCs for processing of MSME Loans?

MSME loans are usually processed between 4 – 15 business days.