MSME Loans:- Micro, Small and Medium Enterprises (MSME) loans are a type of loan that you can apply for if you are an entrepreneur or business owner. This loan provides you with working capital that you can use for a number of things, such as replenishing your inventory, investing in new equipment, paying employees, or improving business a you will help.
In India, consumers can apply for MSME loans from multiple lenders. In addition, interest rates vary between banks.
Features of MSME Loans
With MSME loans, you can simply repay the loan amount in various convenient terms. After a few days, the MSME loan will be approved, and the funds will be transferred online to the MSME account. Longer business performance results in faster repayment and easier access to MSME loans.
MSME loans come with very few additional costs, such as overhead costs. No other expenses are undisclosed. Interest rates on MSME loans are very expensive, ranging from 8.75% p.a.
Small businesses can use it to improve their efficiency. A collateral is not required for MSME loans. Infrastructure development, modernization of infrastructure and promotion of emerging technologies are all through MSME lending in the country especially in Tier-2 and Tier-3 towns and cities
Micro, Small, and Medium Enterprise Loan Details in Highlights
| Interest rate | 8.75% p.a. onwards |
| Loan amount | No minimum limit and a maximum of up to Rs.2 crores, which can exceed as per business requirements |
| Processing fees | Up to 3% of the sanctioned loan amount |
| Repayment tenure | From 12 months to 15 years |
| Collateral/security | Not required for unsecured business loans |
| Foreclosure charges | Nil to 5% of the outstanding principal amount |
| Credit facility type | Term loan (short, intermediate and long-term), working capital loan, cash credit, overdraft, bill discounting, letter of credit and bill of purchase |
MSME Loan Eligibility Criteria
- A credit score of 750 or higher is required.
- A business must generate at least Rs. 2 lakhs in revenue annually, with a minimum turnover of around Rs. 10 lakhs.
- Businesses ought to be financially stable and have a solid track record of repayment.
- Organizations shouldn’t have a history of financial institution loan defaults.
- The applicant’s or a business’s authorized signatory’s minimum age to accept the loan is 21 years old, and their maximum age is 65 years old.
- The candidate or designated signatory must possess a minimum of five years of business experience and have worked for the company or organization for at least three years.
- MSME loans are available to individuals, business owners, and MSMEs who have formed the following kinds of businesses in the manufacturing, trading, and services sectors:
- Private limited companies
- Public limited companies
- Sole proprietorships
- Partnership firms
- Limited Liability Partnerships (LLPs)
MSME Loan Interest Rates of Top Banks
| Bank Name | Interest Rate |
| Indian Bank | 8.75% p.a. onwards |
| Central Bank of India | At the discretion of the bank |
| Punjab and Sind Bank | 9.05% p.a. onwards |
| Punjab National Bank | 9.60% p.a. onwards |
| State Bank of India | 8.25% p.a. onwards |
| Canara Bank | At the discretion of the bank |
| UCO Bank | 8.70% p.a. onwards |
| Union Bank of India | At the discretion of the bank |
Popular Banks Offering MSME Loans
| SBI SME Smart Score Loan | |
| Interest rate | 8.25% p.a. onwards |
| Processing fee | 0.40% of the loan amount |
| Loan amount | Up to Rs.50 lakh |
| Loan repayment tenure | Up to 7 years |
| HDFC Bank SME Business Loan | |
| Interest rate | 15.75% p.a. onwards |
| Processing fee | 0.99% of the loan amount |
| Loan amount | Up to Rs.40 lakh (Rs.50 lakh in select locations) |
| Loan repayment tenure | Up to 48 months |
MSME Loan Interest Rates of NBFCs
| NBFC | Interest Rate |
| Fullerton India | 17% p.a. to 21% p.a. |
| LendingKart | 15% p.a. to 27% p.a. |
| Mahindra Finance | At the discretion of the lender |
| Muthoot Fincorp | At the discretion of the lender |
Popular NBFCs offering MSE MLoans
| Fullerton MSME/SME Loan | |
| Interest rate | 17% p.a. to 21% p.a. |
| Processing fee | Up to 6.5% of the loan amount |
| Loan amount | Up to Rs.50 lakh |
| Loan repayment tenure | 12-60 months |
| Lendingkart MSME/SME Loan | |
| Interest rate | 15% p.a. to 27% p.a. |
| Processing fee | 2% to 3% of the loan amount |
| Loan amount | Rs.50,000 to Rs.1 crore |
| Loan repayment tenure | Up to 36 months |
Documents Required
- KYC documents of the applicant, such as an Aadhaar card, PAN card, passport, voter’s ID, driving license and utility bills.
- Business address proof, such as lease agreement, rental agreement, sale deed or utility bills.
- Previous six months’ bank statement.
- Business establishment certificate of incorporation certificate.
- Profit and loss account and balance sheet of the previous two years.
- PAN card and income tax return of the business.
- Any other document as required by the bank or NBFC.
Collateral for MSME Loans
Banks and NBFCs provide MSME loans, which can be secured or unsecured business loans. But the majority of lenders offer unsecured business loans, sometimes referred to as loans without collateral. Collateral requirements vary depending on the loan plans that the borrower chooses. Collateral-free loans do not require borrowers to provide banks or non-bank financial institutions with security or collateral to receive the loan amount.
