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 the salary of the staff, or for expansion purposes. Various banks and other lenders provide MSME business loans to their customers in India.
MSME Loan Details
Following are the key MSME loan details:
| Loan Amount | Minimum Rs. 30,000 - Rs. 1 Crore |
| Rate of Interest | Based on the applicant’s profile & business requirements |
| Repayment Tenure | Maximum 15 years |
| Processing Fees | 0% - 3% of the loan amount |
| Collateral | Not required in case of unsecured business loan |
| Foreclosure Charges | 0% - 4% of principal outstanding |
| Subsidy | Offered by some lenders |
| Types | Working Capital Loan, Bill discounting, Overdraft, Cash Credit, Letter of Credit, Bill of Purchase, Merchant Cash Advance, etc. |
MSME Loan Interest Rates
MSME loan interest rates vary from one lender to another. For example, SBI SME loan interest rate starts from as low as 8.80% p.a. whereas HDFCMSME business loan interest rate starts from 11.90% p.a. Various factors are considered by lenders when deciding the interest rate on an MSME Loan, including the applicant’s profile, credit score, age, income, turnover, business reputation, experience, and so on.
If borrowers have a good credit score, they can get low MSME interest rates. A credit score is a three-digit number generated by credit bureaus that summarize an individual’s credit repayment history. A credit score above 750 is usually considered good for MSME Loans, but that doesn’t mean you cannot get an MSME Loan with a lower credit score. You can still apply for a loan from some lenders even if your CIBIL Score is 650 or above.
To get instant approval and an attractive interest rate deal on the MSME loan scheme, maintaining a good credit score is always helpful.
Top Banks MSME Loan Interest Rates 2024
| Lender Name | Rate of Interest |
|---|---|
| Axis Bank | 15% onwards |
| Fullerton Finance | 11.99% onwards |
| HDB Financial Services Ltd. | 22% onwards |
| HDFC Bank | 11.90% onwards |
| Hero Fincorp | 18% onwards |
| ICICI Bank | 10% onwards |
| IDFC First Bank | 20% onwards |
| IIFL Finance | 18% onwards |
| Kotak Mahindra Bank | 14% onwards |
| Lendingkart Finance | 15% onwards |
| NeoGrowth Finance | 18% onwards |
| PNB Business Loan | Based on your Business’s Profile |
| SBI | 8.80% onwards (SME Loan) |
| RBL Bank | 19% onwards |
| Tata Capital Finance | 18% onwards |
| ZipLoan | 18% onwards |
Features of MSME Loan / SME Loan
- Instant approval and loan disbursal.
- Affordable interest rates.
- The loan amount available is up to Rs. 1 Crore.
- No collateral or security is required for unsecured business loans.
- Repayment tenure varies from 1 to 15 years.
- Flexible repayment options are available.
- Minimal paperwork and hassle-free processing.
- Multiple types of schemes catering to all business-related needs of the borrowers.
Eligibility Criteria for MSME / SME Loans
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
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.
Top NBFCs for MSME Loans
Many NBFCs (Non-Banking Financial Companies) in India offer MSME loans for startup businesses and to other customers at attractive interest rates. Following are some examples:
| Lender Name | Interest Rate (p.a.) | Loan Amount | Tenure | Processing Fee |
|---|---|---|---|---|
| Fullerton India | 11.99% - 21% | Up to Rs. 50 Lakhs | 12 months - 60 months | Up to 3% of the loan amount |
| LendingKart | 15% - 27% | Rs. 50,000 - Rs. 2 Crores | 1 month - 36 months | 2% - 3% of loan amount |
| Mahindra Finance | 14% onwards | Up to Rs. 40 Crores | 6 months - 7 years | On a case-to-case basis |
| Muthoot Fincorp | 12% - 24% | Rs. 15,000 - Rs. 8 Lakhs | 6 months - 36 months | 2% of loan amount + GST |
Top Banks for MSME Loans
Listed below are some of the most popular banks in India which offer MSME loans:
| Lender Name | Interest Rate (p.a.) | Loan Amount | Tenure | Processing Fee |
|---|---|---|---|---|
| SBI | 8.80% - 15.35% | Rs. 1 Lakh - Rs. 500 Crores | Up to 15 years | Up to 1% of the loan amount |
| HDFC Bank | 11.90% - 21.35% | Up to Rs. 50 Lakhs | 12 months - 48 months | Up to 2.50% of the loan amount |
| ICICI Bank | 10% p.a. onwards | Up to Rs. 2 Crores | Up to 7 years | Up to 2% of loan amount + taxes |
| Axis Bank | 15% onwards | Rs. 10 Lakhs - Rs. 20 Crores | Up to 10 years | Up to 2% of the loan amount |
| Kotak Mahindra Bank | 14% onwards | Rs. 3 Lakhs - Rs. 75 Lakhs | Up to 48 months | Up to 2% of loan amount + taxes |
Calculate an MSME Loan EMI
Calculating MSME Loan EMI is easy and instant with our business loan EMI calculator. All you need to do is follow the steps mentioned below:
- Visit MyMoneyMantra
- Click on the “Business Loan EMI Calculator” tab given under the “Financial Tools” section.
- Enter the required loan amount, the interest rate applied by the lending bank, and the tenure required to repay the loan.
- Hit the “Enter” button
- The result will be displayed on screen in an instant.
- Apart from the prospective EMI for an MSME loan for a new business, the calculator also provides Total Interest, Total Amount to be paid to the lender, and the complete amortization schedule for the loan.
Read Also, Bank of Baroda MSME Loan
FAQs
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, document submission, verification, approval, and disbursal of the loan. However, nowadays most lenders have reduced the turnaround time by adopting online methods. PSB Bank offers MSME loans in 59 minutes with its scheme PSB loans in 59 minutes.
- 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.