MSME LOAN: Eligibility, Interest Rate, Documents Required

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MSME Loan for Small Business

7 mins read

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.

What is MSME Loan?

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.

Benefits of MSME Loan Scheme for Businesses

Some of the benefits of the MSME loan scheme for businesses are:

  • Easy and fast approval process
  • Minimum documentation with digital KYC
  • Competitive interest rates and flexible repayment options
  • Collateral-free loans up to Rs. 2 crore under the CGTMSE scheme
  • Subsidy and tax benefits under various government schemes like PMEGP, CLCSS), Interest Subvention Scheme, etc.
  • Access to online platforms and portals for loan application and tracking, such as Udyam Registration, Udyami Mitra, and PSB Loans in 59 Minutes.

Also read: Importance of MSME Loan for Small Business Owners


Types of MSME Loan

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

Type of MSME Loan





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.


What is the MSME Loan Interest Rate?

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.

MSME Loan Eligibility Criteria

The eligibility criteria for MSME loans also differ from lender to lender, but some of the common requirements are:

  • A business owner who is an Indian citizen.
  • Your business activities are related to manufacturing, trading, or service
  • Need a valid Udyam Registration certificate or Udyog Aadhaar number
  • Required Propper Business plan and project report
  • A good credit score is required to complete the eligibility.
  • Borrowers should have a minimum turnover and profit margin.
  • A minimum business vintage of 1 to 3 years is required.

Documents Required to Get MSME Loan

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.

  • Identity proof: PAN card, aadhaar card, passport, voter ID, driving license, etc.
  • Address proof: Aadhaar card, passport, voter ID, driving license, Water and electricity bills, rent agreement, etc.
  • Business proof: Udyam Registration certificate, Udyog Aadhaar number, GST certificate, trade license, etc.
  • Financial statements: bank statements, ITR, balance sheet, profit and loss account, etc.
  • Project report, business plan, and loan proposal
  • Collateral documents, like property papers, vehicle registration, fixed deposit receipts, etc. If required.

How to Apply for an MSME Loan?

You can follow below common steps to apply for the MSME loan scheme.

  • Visit the official website or branch of your selected lender
  • Check the eligibility criteria and interest rates of a scheme that suits your needs.
  • Fill up the online or offline application form with the required details.
  • Upload and Submit your documents with the application form.
  • Pay the processing fee and other charges.
  • Wait for the verification and approval of your application by the lender.
  • If your loan is approved, sign the loan agreement & receive it in your bank account.

How to Apply for MSME Loan from the Government?

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.

1. Udyami Mitra

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.

2. PSB Loans in 59 Minutes

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

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