Updated on: Jan 4th, 2024
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7 min read
Entrepreneurs or business owners can avail of Micro, Small, and Medium Enterprise (MSME) loans. An MSME loan is a credit facility that banks and Non-Banking Financial Companies (NBFCs) provide to small and medium-scale businesses. They offer MSME loans with limited or no collateral at reasonable interest rates.
An MSME loan for a new business is ideal for running the MSME and improving its financial status by helping them purchase advanced machinery, equipment, stock, paying salaries to employees, etc. It can also help to grow and enlarge MSMEs.
MSME Loan Particulars | Details |
Interest rate | 8.75% p.a. onwards |
Loan amount | No minimum limit and a maximum of up to Rs.2 crores, which can exceed as per business requirements |
Processing fees | Up to 3% of the sanctioned loan amount |
Repayment tenure | From 12 months to 15 years |
Collateral/security | Not required for unsecured business loans |
Foreclosure charges | Nil to 5% of the outstanding principal amount |
Credit facility type | Term loan (short, intermediate and long-term), working capital loan, cash credit, overdraft, bill discounting, letter of credit and bill of purchase |
The features of an MSME loan are as follows:
The MSME loan interest rates of different banks and NBFCs are provided below.
Bank Name | Interest Rate |
Indian Bank | 8.75% p.a. onwards |
Central Bank of India | At the discretion of the bank |
Punjab and Sind Bank | 9.05% p.a. onwards |
Punjab National Bank | 9.60% p.a. onwards |
State Bank of India | 8.25% p.a. onwards |
Canara Bank | At the discretion of the bank |
UCO Bank | 8.70% p.a. onwards |
Union Bank of India | At the discretion of the bank |
Below are details of some of the popular Indian banks offering MSME loans:
SBI SME Smart Score Loan | |
Interest rate | 8.25% p.a. onwards |
Processing fee | 0.40% of the loan amount |
Loan amount | Up to Rs.50 lakh |
Loan repayment tenure | Up to 7 years |
HDFC Bank SME Business Loan | |
Interest rate | 15.75% p.a. onwards |
Processing fee | 0.99% of the loan amount |
Loan amount | Up to Rs.40 lakh (Rs.50 lakh in select locations) |
Loan repayment tenure | Up to 48 months |
NBFC | Interest Rate |
Fullerton India | 17% p.a. to 21% p.a. |
LendingKart | 15% p.a. to 27% p.a. |
Mahindra Finance | At the discretion of the lender |
Muthoot Fincorp | At the discretion of the lender |
Below are details of some of the popular NBFCs in India offering MSME loans:
Fullerton MSME/SME Loan | |
Interest rate | 17% p.a. to 21% p.a. |
Processing fee | Up to 6.5% of the loan amount |
Loan amount | Up to Rs.50 lakh |
Loan repayment tenure | 12-60 months |
Lendingkart MSME/SME Loan | |
Interest rate | 15% p.a. to 27% p.a. |
Processing fee | 2% to 3% of the loan amount |
Loan amount | Rs.50,000 to Rs.1 crore |
Loan repayment tenure | Up to 36 months |
Businesses can obtain MSME loans for the following purposes:
Entrepreneurs can apply for MSME loans in two ways: online and offline. The steps to apply for an MSME loan online are as follows:
Step 1: Visit the website of the bank/lender and select the MSME loan scheme and click on the ‘Apply’ button.
Step 2: Fill out the application form and submit it.
Step 3: A representative of the bank/lender will contact the applicant to verify the loan requirements.
Step 4: The representative will ask to submit the required documents.
Step 5: The loan request will be approved after document verification.
Step 6: The lender will send an agreement to the applicant to complete the process.
Step 7: The loan amount will be credited to the applicant’s account within 48 hours of signing the agreement.
An entrepreneur can also visit the nearest bank or financial institution’s branch and request a loan application form. Applicants need to submit the application and required documents to the branch. The bank/financial institution will approve the loan after verifying the documents.
MSME loans offered by banks or NBFCs can be secured or unsecured business loans. However, most lenders provide unsecured business loans, also known as collateral-free loans. The requirement for giving collateral depends on the loan schemes selected by the borrower. In the case of collateral-free loans, borrowers are not required to submit security/collateral to the banks/NBFCs to obtain the loan amount.
Each bank has various loan schemes for businesses. Borrowers can visit the bank’s website and view the various MSME loan schemes offered by them. Apart from the MSME loan scheme offered by the banks, the government also offers MSME loan schemes through various banks/NBFCs. Some of the MSME schemes offered by banks or financial institutions initiated by the government are as follows:
MSMEs are micro, small and medium enterprises having investments of less than Rs.50 crore and an annual turnover of less than Rs.250 crore. The financial institutions offer many loan schemes for businesses and MSMEs at low-interest rates to help them get funds quickly and grow their business.
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MSME loans are credit facilities for small and medium-sized businesses. They offer flexible repayment, quick approval, and no collateral. Loan details include interest rates and eligibility criteria. Different banks and NBFCs provide MSME loans at varying rates. Businesses can avail of loans for various purposes. Applicants can apply online or offline, providing necessary documents. Collateral may not be required for unsecured loans. Multiple MSME loan schemes are available through banks and government initiatives.