What is an MSME loan?
An MSME loan is business finance for micro, small and medium enterprises registered under the Udyam portal. It can be a term loan to buy machinery, expand premises or start a new unit, or a working-capital facility to fund stock and receivables. Public sector banks offer government-backed schemes such as Pradhan Mantri Mudra Yojana (PMMY), CGTMSE and PMEGP that allow collateral-free funding at subsidised rates, while NBFCs and fintechs offer fast, fully digital unsecured loans.
Government schemes for MSMEs
| Scheme | Loan amount | Highlights |
|---|---|---|
| PM Mudra Yojana — Shishu / Kishore / Tarun / Tarun Plus | Up to ₹50K / ₹5L / ₹10L / ₹20L | No collateral, for non-farm micro enterprises |
| CGTMSE | Up to ₹5 Cr | Government guarantee replaces collateral |
| PMEGP | Up to ₹50 Lakh (manufacturing) | 15–35% capital subsidy for new units |
| Stand-Up India | ₹10 Lakh – ₹1 Cr | For SC/ST and women entrepreneurs |
Eligibility criteria
- Udyam registration as a micro, small or medium enterprise
- Business vintage of 1–3 years (6 months for some fintech lenders)
- Minimum annual turnover of ₹10 Lakh+ depending on the lender
- Promoter credit score of 650+ and no recent defaults
- Profitable operations for the last 1–2 years (for larger term loans)
Documents required
| Purpose | Accepted documents |
|---|---|
| KYC (promoters & business) | PAN, Aadhaar, partnership deed / MOA-AOA |
| Business registration | Udyam certificate, GST registration, shop & establishment licence |
| Financials | Last 2–3 years ITR, audited P&L and balance sheet |
| Banking | Last 12 months current account statements, GST returns |
| Project details | Project report / quotations for machinery (term loans) |
Interest rates, fees & charges
| Charge | Typical range |
|---|---|
| Interest rate (banks) | 9.40% – 14% p.a. |
| Interest rate (NBFC / fintech) | 15% – 28% p.a. |
| Processing fee | 0.5% – 2.5% of loan amount |
| CGTMSE guarantee fee | 0.37% – 1.35% p.a. (often borne by borrower) |
| Prepayment charges | Nil – 4% of outstanding principal |
Tips to get your MSME loan approved
- Register on Udyam and keep GST returns filed on time
- Route business receipts through one current account to show healthy turnover
- Ask your bank for CGTMSE cover if you do not want to pledge collateral
- Keep promoter credit scores above 700 — lenders check all directors / partners
MSME Loan from 19+ partner lenders
LoanLender compares 19 MSME loan offers in one place — including Aditya Birla Capital, CLIX Capital, Credit Saison India, FlexiLoans, HDB Financial Services, Hero FinCorp, InCred Financial, Indifi Technologies, Lendingkart Finance, Muthoot Finance, NeoGrowth Credit, Piramal Finance, Poonawalla Fincorp, Protium Finance, and 5 more partner banks & NBFCs. Indicative rates start from 9.40% p.a.; use filters to sort by lender, interest rate, loan amount and features before you apply. Terms are set by each lender based on your profile.