MSME Loan Scheme 2025 - Types, Interest Rate, Eligibility & How to Apply Online

By Mayashree Acharya

Updated on: May 20th, 2025

Introduction to MSME Loans

Every business owner will require funds for growth at some point. In India, various options exist for Micro, Small, and Medium Enterprises (MSMEs) to obtain necessary funds. Banks, financial institutions, and the Government of India offer loan schemes that support MSMEs in their establishment, growth, and expansion.

This article provides a comprehensive overview of MSME loan schemes, including types, eligibility criteria, and interest rates.

What is an MSME Loan?

An MSME loan is a credit facility provided by banks and Non-Banking Financial Companies (NBFCs) to small and medium-scale businesses. These loans are typically offered with limited or no collateral and at reasonable interest rates. Certain government loan schemes also provide loans to MSMEs at lower interest rates for various purposes, such as purchasing machinery, expanding businesses, and upgrading technology.

An MSME loan for a new business is ideal for enhancing the financial status of the enterprise. It assists in purchasing advanced machinery, equipment, and stock, as well as paying salaries to employees. Moreover, it can facilitate the growth and expansion of MSMEs.

Eligibility for MSME Loans

To qualify for MSME loans, businesses must meet specific criteria:

1. Business Type: All MSMEs engaged in the trading, manufacturing, and service sectors are eligible.

2. Credit Score: A credit score of 750 or above is required.

3. Income and Turnover: The business must have a minimum annual income of Rs. 2 lakhs, with a minimum turnover of around Rs. 10 lakhs per year.

4. Repayment History: A good repayment history with financial stability is essential.

5. Loan Defaults: The business should not have any previous loan defaults with financial institutions.

6. Age of Applicant: The minimum age of the applicant or authorized signatory must be 21 years, while the maximum age is 65 years.

7. Experience: The applicant or authorized signatory must have worked in the enterprise for a minimum of three years and possess at least five years of experience in the business field.

   
   

Individuals, business owners, and MSMEs that have established the following types of businesses engaged in the services, trading, and manufacturing sectors can apply for MSME loans:

• Private limited companies

• Public limited companies

• Sole proprietorships

• Partnership firms

• Limited Liability Partnerships (LLPs)

  
  

Types of MSME Loans

MSMEs can access various types of loans tailored to their specific needs. These include:

1. Term Loans

Term loans are typically provided for a fixed period, ranging from one to five years. These loans can be used for purchasing equipment, machinery, or for expanding business operations.

2. Working Capital Loans

Working capital loans are designed to meet the day-to-day operational expenses of a business. They help in managing cash flow, purchasing inventory, and covering other short-term financial needs.

3. Equipment Financing

This type of loan is specifically aimed at financing the purchase of new or used equipment. It allows businesses to acquire necessary machinery without a significant upfront investment.

4. Government Schemes

The Government of India offers various schemes to support MSMEs. These schemes often provide loans at lower interest rates and with favorable repayment terms. Examples include the Credit Guarantee Fund Scheme and the Micro Units Development and Refinance Agency (MUDRA) scheme.

Interest Rates on MSME Loans

Interest rates on MSME loans can vary based on several factors, including the lender, the type of loan, and the creditworthiness of the borrower. Generally, interest rates range from 8% to 15%. It is advisable for borrowers to compare rates from different lenders to secure the best deal.

How to Apply for MSME Loans Online

Applying for an MSME loan online is a straightforward process. Follow these steps:

1. Research Lenders: Identify banks or NBFCs that offer MSME loans. Compare their interest rates and terms.

2. Gather Documentation: Prepare necessary documents, including identity proof, business registration, financial statements, and credit score.

3. Fill Out the Application: Complete the online application form on the lender's website. Ensure all information is accurate and complete.

4. Submit Documents: Upload the required documents as specified by the lender.

5. Await Approval: After submission, the lender will review the application and documents. They may request additional information.

6. Receive Funds: Upon approval, the loan amount will be disbursed to the business account.

   
   

Conclusion

In conclusion, MSME loans play a crucial role in supporting the growth and expansion of small and medium enterprises in India. By understanding the various types of loans available, eligibility criteria, and the application process, business owners can make informed decisions. Access to adequate funding can significantly enhance the operational capabilities of MSMEs, ultimately contributing to their success in the competitive market.

For more information on MSME loans and to explore available options, visit India Trade Port.