For small and medium-sized enterprises (SMEs), access to finance is a key requirement for growth and development. This is where an MSME loan plays a crucial role. Whether you’re a startup, a manufacturing unit, or a service provider, having the right funding source can help you scale operations, manage cash flows, or upgrade technology. In this detailed guide, we explain what MSME loans are, their types, eligibility, interest rates, and how you can avail them in 2025.
What is an MSME Loan?
This loan is a type of financial product offered to Micro, Small, and Medium Enterprises by banks, NBFCs, and other financial institutions. These loans help businesses meet their capital and operational requirements. MSME loans can be either secured or unsecured, depending on the lender and borrower profile.
These loans are essential because many small businesses do not have easy access to large capital or credit lines. These loan schemes by government and private lenders offer relief through simplified processes and quick disbursals.
Types of MSME Loans Available in India
Here are the major types of MSME loan products offered in 2025:
| Type of Loan | Purpose | Loan Amount (Approx) | Typical Interest Rate |
|---|---|---|---|
| Working Capital Loan | Daily operations and cash flow | ₹50,000 – ₹25 lakhs | 9% – 16% |
| Machinery Loan | Purchase of new machinery | ₹1 lakh – ₹50 lakhs | 8.5% – 15% |
| Business Expansion Loan | Scaling business operations | ₹1 lakh – ₹1 crore | 10% – 17% |
| Term Loan | Fixed-term business projects | ₹2 lakhs – ₹2 crores | 9% – 14% |
| Mudra Loan (under PMMY) | Micro-unit financing | ₹10,000 – ₹10 lakhs | 8% – 12% |
Who Can Apply for an MSME Loan?
To apply for MSME loans, you should meet the basic eligibility criteria. While the conditions might vary by lender, most banks and NBFCs look for:
- A registered business under MSME category (Udyam registration).
- Business vintage of at least 1 year.
- Annual turnover limit based on MSME classification.
- Good credit history (CIBIL score above 650 is preferred).
- Proof of revenue generation and tax returns.
Whether you are a manufacturer, trader, service provider, or involved in the agri-allied sector, you may be eligible for a suitable msme loan scheme.
Documents Required
Lenders typically require the following documents for an MSME loan application:
- Business registration proof (Udyam or GST certificate)
- KYC documents (Aadhaar, PAN, etc.)
- Bank statements (last 6–12 months)
- ITR and financial statements
- Loan application form
- Business plan or proposal (for high-value loans)
MSME Loan Schemes by the Indian Government (2025)
In 2025, the government continues to support the growth of MSMEs through several subsidized loan schemes. Here are some prominent schemes:
| Scheme Name | Offered By | Key Benefits |
|---|---|---|
| CGTMSE (Credit Guarantee Fund) | SIDBI + GoI | Collateral-free loan coverage |
| PMMY – Mudra Yojana | Govt. of India | Loans up to ₹10 lakhs without collateral |
| PMEGP (Employment Generation) | Khadi & Village Industries | Funding for rural entrepreneurs |
| Stand-Up India | Govt. of India | Loans for SC/ST/women entrepreneurs |
| Emergency Credit Line Guarantee | Govt. of India | COVID-19 recovery loans |
These schemes are beneficial for first-time business owners who may not have assets to pledge or strong credit scores.
Interest Rates in 2025
The msme loan interest rate vary based on several factors including borrower profile, loan type, lender policies, and credit rating. Below is a comparison of rates offered by leading banks and NBFCs in 2025:
| Lender | Interest Rate (per annum) | Processing Fee |
|---|---|---|
| State Bank Of India (SBI) | 8.4% – 11.5% | Up to 1% |
| HDFC Bank | 9.5% – 16% | Up to 2% |
| ICICI Bank | 10% – 14.5% | 0.99% |
| Axis Bank | 10.25% – 15% | 1% – 1.5% |
| Bajaj Finserv | 11.75% – 20% | Up to 2.5% |
| Kotak Mahindra | 9.9% – 17% | 1% – 2% |
| Lender | Rate Range (p.a.) | Fixed / Floating | CIBIL/Risk Rating | Women / Special Concessions | Product & Loan Features |
|---|---|---|---|---|---|
| Central Bank of India | 8.25 % – 10.35 % (varies by scheme) | Floating (RBLR-linked) | Based on internal rating up to CBI‑6 tiers | No explicit women discount | Multiple schemes: Business, GST, Mortgage, Export, Green MSME; up to ₹50 L term and OD |
| Oriental Bank of Commerce | 7.75 % – 12.5 % (PSB range) | Floating (MCLR/RBLR) | Up to 0.25% concession for good CIBIL‑Rank 1–3 | Women entrepreneur: 0.50% concession | Business loans via PSB 59‑Min scheme; credit‑guaranteed options |
| State Bank Of India (SBI) | 7.75 % – 13.5 % (with CGTMSE) | Floating (EBLR/MCLR) | Tiered on credit and risk score via SME Smart Score | No specific women rate, but gov’t schemes available | SME Smart Score loans up to ₹50 L; overdraft & term loan combo |
| Union Bank of India | 7.85 % – 12.25 % p.a. | Floating (MCLR/RBLR) | At discretion; CGTMSE guarantee available | – | CGTMSE-covered business loans |
| Bank of Baroda | ~8.10 % – 13.0 % | Floating | – | – | Public sector MSME loans with collateral-free caps |
| PNB | ~7.70 % – 17.0 % | Floating | Women entrepreneurs get 0.50% concession | Women-specific discount | Priority sector working cap & term loans |
| ICICI Bank | 9.00 % – 14.0 % | Floating | Based on credit profile and collateral | – | Term loans up to ₹1 Cr; processing ~1% |
| Axis Bank | 9.15 % – 16.0 % | Floating | Credit-based tiers | – | SME loans via CGTMSE; unsecured business |
| HDFC Bank | 9.25 % – 16.0 % | Floating | – | – | Collateral and unsecured MSME loans |
| Kotak Mahindra | 10.0 % – 17.0 % | Floating | – | – | Loans up to ₹25 L bez collateral |
| Bajaj Finserv | 9.75 % – 30 % (unsecured) | Floating | Credit-history based | – | Quick online MSME loans up to ₹50 L with zero prepayment fees |
🔍 Key Insights
- Lowest Rates: Public sector banks (Central Bank, PNB, Canara/BOB) offer rates from 7.70 % depending on scheme.
- CIBIL/Risk Based Pricing:
- Central Bank uses internal rating (CBI‑1 to CBI‑6) across schemes.
- Oriental Bank applies 0.25% discount for MSMEs with CMR 1–3.
- PNB offers 0.50% women entrepreneur discount .
- Guaranteed Loans: CGTMSE-backed loans (up to ₹5 Cr) are widely offered across PSBs.
- Unsecured & NBFC Options:
- Bajaj Finance (starting at 14%) and Kotak (10–17%) offer fast, collateral-free MSME loans.
✅ Recommendations
- Lowest cost with collateral: Go for Central Bank or PNB (7.7–8.25%) especially if you qualify for internal rating or women concessions.
- CIBIL-based benefit: Choose Oriental Bank for credit-score-linked discounts.
- Fast & unsecured: Opt for Bajaj or Kotak if speed matters more than lowest rate.
- Large loans with guarantee: SBI, Union, and PSBs are great for CGTMSE-backed funding up to ₹5 Cr.
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Features of MSME Loan
Some important features that make msme loan schemes attractive in 2025:
- Collateral-free options for eligible businesses.
- Flexible repayment tenures ranging from 1 to 7 years.
- Quick loan disbursement — in some cases within 72 hours.
- Loans available both online and offline.
- Customized loan amounts based on business needs.
- Support for women entrepreneurs and backward communities.
How to Apply for an MSME Loan Online?
Applying for an msme loan is now easier than ever, thanks to digital lending platforms and government-backed portals. Here’s how to apply online:
- Visit the bank or NBFC’s official website.
- Select “Business Loan” or “MSME Loan” section.
- Fill the online application form.
- Upload necessary documents.
- Wait for eligibility check and approval.
- Loan disbursal post-verification (usually within a few days).
Many fintech platforms also offer a comparison tool to help you choose the right loan based on your credit score, turnover, and loan amount.
Common Mistakes to Avoid
While applying for an msme loan, business owners should avoid:
- Submitting incomplete documents.
- Overborrowing beyond repayment capacity.
- Ignoring the terms and hidden charges.
- Applying to multiple lenders simultaneously.
Being well-prepared and transparent improves your chances of approval.
FAQs on MSME Loan
A. Yes, startups can apply under specific schemes like Mudra or CGTMSE.
A. Not always. Many loans are unsecured, especially those under government schemes.
A. Loan amounts range from ₹50,000 to ₹2 crores depending on business size and need.
A. It can vary from 12 months to 84 months (7 years).
A. Some government-backed schemes may consider lower scores, but private lenders prefer 650+.
A. The full form of MSME is Micro, Small and Medium Enterprises.
Conclusion
An MSME loan is more than just financial support—it’s a growth catalyst for small businesses. With government schemes, competitive interest rates, and increasing digital access, availing an MSME loan in 2025 is both practical and empowering. Whether you want to expand your workforce, buy machinery, or upgrade infrastructure, there is a suitable loan waiting for your business needs.