For those looking to start a business or expand an existing enterprise, an MSME loan of up to ₹50 lakh can provide the necessary financial support. These loans are tailored for Micro, Small, and Medium Enterprises (MSMEs) and are offered through banks and various government-backed schemes. Let’s explore the key aspects of MSME loans in 2025, eligibility criteria, interest rates, and more.
What is an MSME Loan?
An MSME loan is a type of financing provided to businesses categorized as Micro, Small, and Medium Enterprises. The loan can be used for:
- Purchasing new machinery
- Procuring raw materials
- Expanding business operations
- Managing working capital
These loans come with competitive interest rates and can be collateral-free, making them highly accessible to small business owners.
Eligibility Criteria for MSME Loan
To qualify for an MSME loan, the following general conditions apply:
| Criteria | Details |
|---|---|
| Age of Applicant | 18 to 65 years |
| Type of Business | Manufacturing, Trading, or Service Sector |
| Business Registration | Must be legally registered |
| Credit Score | A good credit score improves loan terms |
Note: Each lender may have additional specific requirements based on the loan scheme.
New MSME Definition (Effective from 2020)
The definition of MSMEs was revised to include both investment and annual turnover criteria.
| Classification | Investment Limit | Turnover Limit |
|---|---|---|
| Micro | Up to ₹1 crore | Up to ₹5 crore |
| Small | Up to ₹10 crore | Up to ₹50 crore |
| Medium | Up to ₹50 crore | Up to ₹250 crore |
This reclassification allows more enterprises to qualify as MSMEs and benefit from specialized loan schemes.
Documents Required for MSME Loan 2025
When applying for an MSME loan, you will need to provide several documents, including:
| Category | Documents Needed |
|---|---|
| Identity Proof | PAN Card, Aadhaar Card, Passport, or Voter ID |
| Address Proof | Utility Bill, Ration Card, or Rental/Lease Agreement |
| Business Proof | Business Registration Certificate |
| Financial Records | Income Tax Returns, Bank Statements (last 6 months) |
| Project Report | Business plan detailing loan usage |
Note: The document list may vary depending on the lender and loan scheme.
Where to Get MSME Loans in 2025
You can apply for MSME loans through:
1. Government-Backed Schemes
- Mudra Yojana: Loans up to ₹10 lakh for micro-enterprises
- Stand-Up India: Financing for SC/ST and women entrepreneurs
- CGTMSE (Credit Guarantee Fund Scheme): Collateral-free loans up to ₹2 crore
2. Banks Offering MSME Loans
| Bank | Interest Rate (per annum) |
|---|---|
| State Bank of India | At the bank’s discretion |
| Punjab National Bank | 9.40% onwards |
| Central Bank of India | 9.35% onwards |
| UCO Bank | 8.85% onwards |
| Union Bank of India | At the bank’s discretion |
Popular NBFCs Offering MSME Loans in 2025
Non-Banking Financial Companies (NBFCs) are financial institutions that provide various financial services similar to banks, but they do not hold a banking license from the Reserve Bank of India (RBI). This means they cannot accept demand deposits (like checking accounts) or issue checks. NBFCs also provide attractive MSME loan options:
| NBFC | Interest Rate | Loan Amount |
|---|---|---|
| LendingKart | 1.25% per month | ₹50,000 to ₹2 crore |
| SFMG India Credit | Up to 21% | Up to ₹75 lakh |
| Mahindra Finance | 6% – 26% p.a. | Based on the lender’s discretion |
How to Apply for an MSME Loan (Online and Offline) in 2025?
Online Application
- Visit the MSME’s official website or the government scheme portal.
- Fill out the application form with your personal and business details.
- Upload required documents (business registration, PAN, Aadhaar, etc.).
- Submit the application and track its progress online.
Offline Application
- Visit your nearest bank branch.
- Request an MSME loan application form.
- Fill out the form and submit it along with supporting documents.
Loan Interest Rates and Terms
The interest rate on MSME loans varies depending on the lender and the borrower’s creditworthiness.
| Interest Rate | 7% to 14% per annum |
|---|---|
| Loan Amount | ₹50,000 to ₹50 lakh or more |
| Loan Tenure | Up to 15 years |
| Processing Fee | Varies by lender |
Benefits of MSME Loans
- Collateral-Free Loans: Most MSME loans are unsecured, meaning no security is required.
- Lower Interest Rates: Rates start as low as 8.85% per annum.
- Flexible Repayment Terms: Loan tenures can go up to 15 years, allowing for easier repayment.
- Quick Disbursement: Government-backed schemes ensure faster approval and fund release.
How to Check Credit Scores for MSME Loans
Maintaining a good credit score can increase your chances of loan approval. You can check your business’s credit score through:
- CIBIL’s official website (1 free report per year)
- Financial service providers offering free credit score checks
Frequently Asked Questions (FAQs)
Yes, under schemes like CGTMSE, loans up to ₹10 lakh are collateral-free. Some banks may extend this limit to ₹25 lakh based on the business’s financial standing.
Priority sector lending refers to loans directed toward sectors that significantly impact the economy and employment. MSMEs fall under this category, making them eligible for special loan benefits.
Failure to repay an MSME loan can result in a penalty interest of up to 3 times the RBI’s bank rate, along with potential legal action.
While it’s not mandatory, having a credit rating can help secure better interest rates and lower processing fees.
Deepak Verma is a graduate from Delhi University with a First Division. With 8 years of teaching experience in Mathematics and Science, he has mentored secondary and senior secondary students. Currently, he is an author at SAMSA, where he applies his expertise to create engaging educational content.