Overview of MSME Loans in 2025
If you run a small or medium business in India, an MSME loan can help you manage and grow your business with ease. MSME stands for Micro, Small, and Medium Enterprises, and these loans provide money to cover things like buying new machines, restocking your inventory, paying salaries, or expanding your business.
You can apply for MSME loans with many banks and financial companies across India. Interest rates can change depending on the lender, but these loans usually come with simple terms and sometimes no need for collateral.
Main Details of MSME Loans
| Interest Rate | Starting from 8.75% per year |
| Loan Amount | No minimum limit; up to Rs. 2 crores or more based on your business needs |
| Processing Fees | Up to 3% of the loan amount |
| Repayment Tenure | 12 months to 15 years |
| Collateral | Not required for unsecured loans |
| Foreclosure Charges | Nil to 5% of outstanding principal |
| Types of Credit | Term loans, working capital loans, cash credit, overdrafts, bill discounting, letters of credit, and bills of purchase |
Main Features of MSME Loans
- Flexible repayment options so you can pick a schedule that fits your business.
- Quick approval and fast fund transfer, often within a few days.
- Low extra charges, with only small processing fees.
- Interest rates start low, making it affordable for small businesses.
- Many loans don’t require collateral, making it easier for startups and small enterprises.
- Supports growth in Tier-2 and Tier-3 cities by modernizing and expanding businesses.
Who Can Get an MSME Loan? Eligibility Criteria
- Your business should have an annual turnover of at least Rs. 10 lakhs, with minimum revenue around Rs. 2 lakhs yearly.
- A credit score of 750 or above makes approval easier.
- Applicants should be between 21 and 65 years old.
- You should have a stable financial record without defaults.
- A minimum of five years in business experience, with at least three years in the current company.
- Businesses in manufacturing, trading, or services sectors, including sole proprietorships, partnerships, private and public limited companies, and LLPs are eligible.
MSME Loan Interest Rates in 2025
Interest Rates from Top Indian Banks
| Bank | Interest Rate |
| Indian Bank | 8.75% per year onwards |
| Central Bank of India | Changes as per bank policy |
| Punjab and Sind Bank | 9.05% per year onwards |
| Punjab National Bank | 9.60% per year onwards |
| State Bank of India (SBI) | 8.25% per year onwards |
| Canara Bank | Changes by bank discretion |
| UCO Bank | 8.70% per year onwards |
| Union Bank of India | Changes as per bank rules |
Popular MSME Loan Options from Banks
| SBI SME Smart Score Loan | |
| Interest Rate | 8.25% per year onwards |
| Processing Fee | 0.40% of loan amount |
| Max Loan Amount | Up to Rs. 50 lakh |
| Repayment Tenure | Up to 7 years |
| HDFC Bank SME Business Loan | |
| Interest Rate | 15.75% per year onwards |
| Processing Fee | 0.99% of loan amount |
| Max Loan Amount | Up to Rs. 40 lakh (Up to Rs. 50 lakh in select areas) |
| Repayment Tenure | Up to 48 months |
Interest Rates of MSME Loans from NBFCs
| NBFC | Interest Rate |
| Fullerton India | 17% to 21% per year |
| LendingKart | 15% to 27% per year |
| Mahindra Finance | Changes by lender discretion |
| Muthoot Fincorp | Changes by lender discretion |
Popular NBFC MSME Loans Details
| Fullerton MSME/SME Loan | |
| Interest Rate | 17% to 21% per year |
| Processing Fee | Up to 6.5% of loan amount |
| Max Loan Amount | Up to Rs. 50 lakh |
| Repayment Tenure | 12 to 60 months |
| LendingKart MSME/SME Loan | |
| Interest Rate | 15% to 27% per year |
| Processing Fee | 2% to 3% of loan amount |
| Loan Amount | Rs. 50,000 to Rs. 1 crore |
| Repayment Tenure | Up to 36 months |
Purpose of MSME Loans
- Start a new business or grow an existing one.
- Buy furniture, electrical items, machines, or lab equipment.
- Purchase machinery or vehicles for the business.
- Build buildings or buy land for business use.
- Launch new commercial products.
- Cover working capital needs like buying raw materials, paying salaries, and restocking inventory.
- Marketing and advertising expenses.
How to Apply for an MSME Loan in 2025
Applying Online
- Go to the lender’s website and find the MSME loan section.
- Fill out the application form and submit it.
- A representative will contact you to check your eligibility.
- Submit the required documents as asked.
- After approval, sign the loan agreement.
- The loan amount will be transferred to your account, usually within 48 hours.
Applying Offline
- Visit the nearest bank or financial institution branch.
- Get and complete the loan application form.
- Submit the form with all required documents at the branch.
- After verification, the loan will be approved and paid out.
Documents Needed for MSME Loans
- KYC documents: Aadhaar, PAN, Passport, Voter ID, Driving License, or Utility bills.
- Proof of business address like rental agreement, lease deed, or utility bills.
- Bank statements for the last six months.
- Business establishment certificate or registration documents.
- Profit and loss statement and balance sheets for the last two years.
- PAN card and income tax returns of the business.
- Additional documents as per the lender’s request.
Do You Need Collateral for an MSME Loan?
You can get secured or unsecured MSME loans. Unsecured loans don’t need collateral, which is helpful if you don’t own big assets. Collateral depends on the loan type and lender. RBI rules say banks must give loans up to Rs. 10 lakh without collateral. Sometimes this limit can go up to Rs. 25 lakh based on your business’s financial record.
Government MSME Credit Schemes
Besides banks, the Indian government supports MSMEs with special loan schemes. Some popular ones include:
- Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)
- Credit Linked Capital Subsidy Scheme (CLCSS)
- Credit Guarantee Scheme for Subordinate Debt (CGSSD)
- PMMY – Mudra Yojana
- National Small Industries Corporation (NSIC) Subsidy
- Prime Minister Employment Generation Programme (PMEGP)
- Standup India
- Startup India
- Others like PSB Loans in 59 Minutes and Fund of Funds for MSME equity infusion
Frequently Asked Questions about MSME Loans
Is MSME part of the priority sector lending?
Yes, MSMEs are included in priority sector lending because they provide jobs and support the economy. Banks have to meet certain targets lending to MSMEs along with sectors like agriculture, education, and housing.
Do all banks offer loans to MSMEs?
Almost all scheduled commercial banks, both public and private, offer MSME loans. RBI has rules to make sure banks lend a fair amount to MSMEs.
Does having a credit rating help?
Getting a credit rating is not required but it helps in getting better interest rates and lowers processing fees.
Can I get a loan without collateral?
Yes, banks must offer loans up to Rs. 10 lakh without collateral. Depending on your business, this limit may increase.
If you have a growing business and need funds, MSME loans in 2025 offer flexible, affordable solutions to help you move forward. Check with your bank or an NBFC to find the best loan that fits your needs.