WHAT IS A MSME Loan?

MSME loan is a credit option for individuals, businesses, startups, and MSMEs (Micro Small and Medium Enterprises) for setting up a new business, meeting working capital and cash flow requirements, purchasing new equipment and machinery, paying salary of the staff, or for expansion purposes. Various banks and other lenders provide MSME business loans to their customers in India.

Features of MSME Loan
  • Instant approval and loan disbursal.
  • Affordable interest rates.
  • Loan amount available up to Rs. 1 Crore.
  • No collateral or security required for unsecured business loans.
  • Repayment tenure varies from 1 to 15 years.
  • Flexible repayment options available.
  • Minimal paperwork and hassle-free processing.
  • Multiple types of schemes catering to all business-related needs of the borrowers.
Eligibility Criteria for MSME

Following are the detailed MSME loan eligibility:

  • Eligible entities: Self-employed individuals, self-employed professionals, business owners, SMEs, MSMEs, women entrepreneurs, Private/ Public Limited Companies, Partnership Firm, Sole Proprietorship, and Limited Liability Partnership that are engaged in trading, services & manufacturing sectors.
  • Minimum business vintage requirement to meet MSME loan criteria: 1 year.
  • Minimum business turnover requirement: Varies from bank to bank
  • Credit history: Good credit score and repayment history with financial stability
  • Any other personal needs/contingencies
Documents Required for MSME Loan:
  • Identity proof: Aadhaar card, passport, PAN card, Voter’s ID card, etc.
  • Residence proof:Rental agreement, utility bills, ration card, etc.
  • Business address proof:Lease agreement, utility bills, or rental agreement.
  • Income proof: P&L account & balance sheet of last 2 years, income tax returns, sales tax return, PAN card, project report, etc.
  • Proof of securities (if provided): Photocopies of title/ lease deeds offered as securities.

FAQs on MSME:

The turnaround for MSME loans varies from one lender to another. It takes a few weeks to complete the entire MSME loan process including application, documents submission, verification, approval and disbursal of the loan. However, nowadays most lenders have reduced the turnaround time by adopting the online methods. PSB Bank offers MSME loan in 59 minutes with its scheme PSB loans in 59minutes.

  • Identity proof: Aadhaar card, passport, PAN card, Voter’s ID card, etc. 
  • Residence proof: Rental agreement, utility bills, ration card, etc.
  • Business address proof: Lease agreement, utility bills, or rental agreement. 
  • Income proof: P&L account & balance sheet of last 2 years, income tax returns, sales tax return, PAN card, project report, etc.
  • Proof of securities (if provided): Photocopies of title/ lease deeds offered as securities.

No. You have to pay an interest (as decided by the lender) on MSME startup loan along with the processing fee as applicable.

You can approach a bank, NBFC or financial marketplaces like MyMoneyMantra to get a loan for setting up or expanding your MSME. If you are looking for an instant MSME loan apply online.

The maximum limit for collateral free loans for MSME varies depending on the lender, type of scheme and borrower’s eligibility. For example, SBI offers MSME loan up to Rs. 500 Crores, HDFC offers up to Rs. 50 Lakhs, ICICI Bank offers loan up to Rs. 2 Crores, and so on.

The processing fees for MSME loan without collateral vary from 0% to 3% of the sanctioned loan amount and pre-closure charges range from 0% to 4% of the principal outstanding.

MSME includes manufacturing and service industries.