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Published: 9 March 2023
Updated: 2 May 2024
Are you a small business owner who is looking for a loan to grow your business? Do you want to know about the various schemes and benefits of MSME loans in India? If yes, then this article is for you. In this article, we will explain to you what is an MSME loan, how it can help your business, what are the types and features of MSME loans, who can apply for them, what are the eligibility and documents required, and how you can apply for this loan. We will also tell you how to avail MSME loans online from the government. Read to find out more.
An MSME loan is a funding scheme in which banks and NBFC provide loans to small businesses in India. Businesses come under the MSME sector invest money in plants and machinery. The loan under this scheme is designed to fulfill the specific needs and challenges of businesses. Working capital, business expansion, modernization, technology upgradation, and marketing are some challenging issues for small businesses. MSME loans are also known as SME loans or startup loans.
Some of the benefits of the MSME loan scheme for businesses are:
Also read: Importance of MSME Loan for Small Business Owners
There are different types of MSME loans online available in India, depending on the purpose, amount, tenure, and features of the loan. Some of the common types of MSME instant loans are:
MSME Loan Details |
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Type of MSME Loan |
Purpose |
Amount |
Tenure |
Features |
Term Loan |
To purchase fixed assets, such as machinery, equipment, land, building, etc. |
Up to Rs. 10 crore |
Up to 15 years |
Secured or unsecured, fixed or floating interest rate, moratorium period, prepayment penalty, etc. |
Working Capital Loan |
To meet the day-to-day operational expenses, such as raw materials, inventory, wages, rent, etc. |
Up to Rs. 10 crore |
Up to 1 year |
Secured or unsecured, overdraft, cash credit, bill discounting, letter of credit, etc. |
Mudra Loan |
To start or expand micro-enterprises in manufacturing, trading, or service sectors |
Up to Rs. 10 lakh |
Up to 5 years |
Collateral-free, three categories - Shishu, Kishore, and Tarun, based on the stage of the business and loan amount |
Stand Up India Loan |
To support entrepreneurship among women and SC/ST communities |
Rs. 10 lakh to Rs. 1 crore |
Up to 7 years |
Collateral-free, composite loan for setting up a greenfield enterprise, 75% of the project cost, margin money of 25%, the interest rate of MCLR + 3% + tenor premium |
MSME Exporters’ Gold Card Scheme |
To provide credit facilities to exporters in the MSME sector |
Up to Rs. 10 crore |
Up to 3 years |
Pre-shipment and post-shipment finance, foreign currency loans, reduced margin, concessional interest rate, etc. |
The interest rates of MSME loans are different according to the multiple lenders. Lending institutions provide interest rates according to some factors: loan amount, CIBIL record, loan tenure, lending policies, etc. Generally, the interest rate of MSME loans are lowest and ranges between 8% to 18% per annum. The government is also giving subsidy facilities to the borrower under this initiative.
The eligibility criteria for MSME loans also differ from lender to lender, but some of the common requirements are:
The documents that are required to get an MSME loan may be different according to the lenders, but below are some basic documents you should prepare.
You can follow below common steps to apply for the MSME loan scheme.
To support the MSME sector government of India launches many schemes. These schemes are beneficial for low-interest loans and subsidies. Below are some ways you can follow to apply for MSME loan from the government.
It is a website where you can apply and get financial support as a small business. You need to register as a borrower and select a loan option according to your need.
This is a website that helps in quick approval for MSME loans from financing institutions. You need to register as a borrower and give your details. Select the best loan option and lending institution. You will receive a letter and visit the bank with documents to process your loan disbursement.
MSME instant loan is the best option to take a loan for your business and you can use this money to fulfill your business operational requirements like purchasing new equipment, and machinery. Use this money for working capital and hiring new employees. MSME scheme makes your business goal easy. With low interest rates and subsidies this financing option makes your financing convenient. You can apply for this scheme through the government, banks, and NBFC. You can apply on My Mudra, a lending platform that provides business loans to small businesses with great offers. We hope this article has helped you understand the basics of an MSME loan and how to apply for it.
Also read: Get 10 Lakh Personal Loan Online in Minutes at low EMIs