MSME Loan – Check Features, Eligibility, and Interest rates 2024

MSME stands for Micro, Small, and Medium Enterprises which are businesses or Startups whose turnover is less than Rs.250 Cr. 

MSME is a very important part of the Indian Economy because they contribute more than 33% of the GDP of India. The jobs created by MSMEs are also phenomenal as around 120+ million jobs are created by the MSME businesses.

Being such an essential part of the economy, it is very important to design and implement policies and facilitation so that the MSME businesses can run their business smoothly.

The biggest problem faced by the MSMEs is access to credit. MSME businesses circulate the money that they have again and again to make the business run.

But sometimes due to non-payment of the dues from the customers, MSMEs can face a huge cash crunch which becomes a hurdle to their growth.

That’s where a credit loan comes to the rescue of the MSMEs. An MSME loan fulfills the credit requirement of the business and helps them to make their finances easy.

In 2022 alone, MSME loans worth Rs.32 trillion were sanctioned which is a massive growth of 182% than the previous year.

If you are an MSME business then this article will be very important for you. In this article, we will discuss MSME Loan – Check Features, Eligibility, and Interest rates.

But first, let’s find out what are MSME loans.

What are MSME loans?

MSME loans are loans provided to Micro, Small, and Medium Enterprises by banks, NBFCs, or other financial institutions. These loans are crucial for the economic growth of a country as these loans are designed to provide them with financial support which is required to start, expand or modernize their businesses.

MSME loans Interest Rate 2024

The following are the interest rate provided to the MSMEs by various banks-

Bank Name	Interest rate
Allahabad Bank	At the discretion of the bank
Oriental Bank of Commerce	10.70% p.a. onwards
Andhra Bank	At the discretion of the bank
Central Bank of India	11.25% p.a. onwards
Indian Bank	9.75% p.a. onwards
Punjab and Sind Bank	9.95% p.a. onwards
Punjab National Bank	At the discretion of the bank
State Bank of India	7.65% p.a. onwards
Syndicate Bank	At the discretion of the bank
UCO Bank	8.85% p.a. onwards
Union Bank of India	At the discretion of the bank
United Bank of India	10.25% – 16.25% p.a.

NBFC MSME Loan Schemes

The following are the MSME Loan Schemes provided by the NBFC-

Bank Name	Interest rate
Lendingkart	At the discretion of the lender
Fullerton India	17% p.a. to 21% p.a.
Mahindra Finance	At the discretion of the lender
Muthoot Fincorp	At the discretion of the lender

Other MSME Loans Schemes

The following are the other MSME Loans schemes available to get-

Name of Scheme	Sub-Schemes
MUDRA Loan	Micro-Credit Scheme Credit for Micro Finance Refinance Scheme for Banks Mahila Uddyami Scheme MUDRA Card Equipment Finance Scheme Credit Guarantee Scheme
Credit Guarantee Funds Trust for Micro and Small Enterprises (CGTMSE)	N/A
Prime Minister’s Employment Generation Programme (PMEGP)	N/A

Eligibility Criteria for Availing of MSME Loans

The following are the eligibility criteria to avail of an MSME loan-

Type of business

• Manufacturing Sector
• Service Sector

Size of business (in terms of investment) – Manufacturing Sector    

• Micro – < Rs.25 lakh
• Small – < Rs.5 crore
• Medium – < Rs.10 crore

Size of business (in terms of investment) – Service Sector    

• Micro – < Rs.10 lakh
• Small – < Rs.2 crore
• Medium – < Rs.5 crore

RBI Guidelines for MSME Loans

The following are the RBI Guidelines for MSME Loans-

• All credit-related matters of the banks including charging the interest are deregulated by the RBI and are governed by the bank’s lending policies
• There is no collateral security required in case of loans up to Rs.10 lakhs extended to the unit in the MSME sector
• There is no requirement for credit rating by the external rating agencies if the maximum aggregate exposure to one counterparty does not exceed the threshold limit of Rs.7.5 Cr

Documents Required for MSME Loans

The following are the documents required for MSME Loans-

• PAN card, Aadhaar card, Voter’s ID, passport
• Rental agreement, ration card, utility bills
• Rental agreement, lease agreement, utility bills
• P/L account and balance sheet copies of the last 2 years
• It returns, sales tax returns, PAN card
• Photocopies of title deeds/lease deeds offered as securities
• Projected balance sheet, project report, etc.

How To Get MSME Loans?

MSME (Micro, Small, and Medium Enterprises) loans are offered by various financial institutions such as banks, non-banking financial companies (NBFCs), and other lending institutions. Here are the steps to get an MSME loan:

• The first step is to determine the amount of loan you require based on your business needs and the purpose of the loan
• Research and identify the lenders that offer MSME loans. Compare the interest rates offered by different lenders. You can also use the loan agent services to find the best deal
• Check the eligibility criteria of the lender to ensure that you meet their requirements
• Collect all the documents required by the lending partner such as business registration certificate, PAN card, GST registration certificate, bank statements, income tax returns, etc.
• Now, fill in the loan application form with accurate details and submit it along with the required documents to the lender
• Your loan application will be reviewed and evaluated based on various factors such as your credit score, financial history, business performance, etc
• If your loan application is approved, the lender will offer you the loan amount along with the terms and conditions of the loan
• For that, you’ll have to make emanate i.e., the monthly Emi deduction account confirmation
• After accepting the loan offer, the lender will disburse the loan amount to your bank account.

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