MSME stands for Micro, Small, and Medium Enterprise. An MSME loan, also known as an SME Loan (Small and Medium Enterprise Loan), is a financial facility provided to small business owners, startups, and entrepreneurs to meet their business-related financial requirements. These loans are aimed at supporting the growth and development of businesses by providing necessary financial assistance.
The tenure of an MSME loan typically depends on the loan amount and the fulfillment of the eligibility criteria. The interest rate on MSME loans is determined based on various factors such as:
MSME loans are offered by the Government of India, as well as by banks and Non-Banking Financial Companies (NBFCs). However, only those applicants who meet the prescribed eligibility criteria can avail of these loans.
Applying for an MSME loan has become easier with online application facilities, making it convenient for businesses to access the funds they need for growth and expansion.
From 1st July onwards, the government has revised the definition of enterprises under MSME. You can check below to see which MSME classification your business falls under.
Enterprise | Turnover | Investment |
---|---|---|
Micro | Up to ₹2.5 crore | Up to ₹10 crore |
Small | Up to ₹25 crore | Up to ₹100 crore |
Medium | Up to ₹125 crore | Up to ₹500 crore |
Bank/NBFC | Interest Rate (per annum) |
---|---|
HDFC Bank | 10.75% to 22.50% p.a. |
SBI (Mudra Loan) | 10.10% p.a. onwards |
Bajaj Finserv | 14% to 30% p.a. |
Lendingkart Finance | 1.25% per month onwards |
Axis Bank | Ceiling rate of 18% p.a. |
ICICI Bank | Up to Repo Rate + 6.0% |
Kotak Mahindra Bank | Starting from 16% p.a. |
Punjab National Bank (Mudra Loan) | RLLR + 1.40% |
Corporation Bank | 10.30% |
Bank of India | Approximately 9.70% p.a. |
IDFC First | 13% to 23% p.a. |
HDB Finance | 8% to 26% p.a. |
Fullerton Finance | 17% |
Flexiloans | Starting at 1% per month |
RBL Bank | Starting from 17.50% p.a |
Note: The interest rates, fees, and charges listed above are subject to change according to the direction of the bank, NBFC, and RBI. GST and sales tax are charged separately for the above charges.
Below we mention the documents that you should require to apply for an MSME loan:
These documents establish the identity of the applicant (proprietor/partner/director):
You need to provide documents showing your residential and business address. Accepted documents include:
To confirm the legal existence of your business, you may submit:
Submit recent bank account statements (6 to 12 months) from your business account:
The financial health of your business is evaluated through:
To verify the location and rights of business premises:
Depending on the type and purpose of the MSME loan, banks/NBFCs may ask for:
There are several schemes available under the MSME loan category, designed to support and promote small businesses in India. These schemes are launched and supported by the Government of India and financial institutions. The key MSME loan schemes are mentioned below:
The MUDRA Loan stands for Micro Units Development and Refinance Agency Loan. It falls under the Pradhan Mantri Mudra Yojana (PMMY), which aims to provide financial support to micro and small enterprises. This scheme is categorized into three segments based on the loan amount:
These categories are designed to support businesses at various stages of growth from the startup phase to expansion.
The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme provides collateral-free loans to new and existing micro and small enterprises. It was launched by the Government of India in collaboration with SIDBI (Small Industries Development Bank of India).
It helps businesses obtain credit without needing to provide any security or third-party guarantees.
This scheme aims to encourage lenders to provide financial support to small businesses that may not have access to collateral.
The Prime Minister’s Employment Generation Programme (PMEGP) is a credit-linked subsidy scheme. It combines elements of the Prime Minister’s Rojgar Yojana (PMRY) and the Rural Employment Generation Programme (REGP). Launched in 2008, the scheme is aimed at providing employment opportunities to unemployed youth and traditional artisans by assisting them in setting up micro-enterprises.
These MSME loan schemes are designed to boost entrepreneurship, generate employment, and promote inclusive economic growth across urban and rural areas.
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