Detailed Guide for MSME Business Loan

The Micro, Small, and Medium Enterprises (MSME) sector has emerged as a highly dynamic sector of the Indian economy. As the name suggests, the sector covers micro, small and medium-sized businesses. 

The MSME sector is the growth driver of India’s exports, accounting for nearly 42.67% of the exports from India as of August 2022. 

In India, more than 9 crore MSMEs are chasing their goals for expansion. Companies in the MSME sector have their own financial concerns about their growth journey. 

One of the concerns is the timely availability of required funds. MSME loans are the solution for many small and large companies. 

Reputable financial institutions offer collateral-free funding options and high loan amounts at competitive interest rates to support MSMEs. In this article, learn about MSME loans and apply online with renowned lenders.


Who can Apply for MSME Business Loans? 

Companies registered under the MSME scheme in the Udyam Portal can apply for MSME business loans with financial institutions. Lending institutions have prescribed a few eligibility parameters to apply for MSME loans. Common eligibility parameters for MSME business loans are as follows:

  • A businessperson should be aged 22-65 years. 
  • Sole proprietors and private companies engaged in manufacturing, services, or trading sectors can apply. 
  • The loan applicant should have a minimum of three years of experience in the present business and a five year overall experience.
  • The minimum annual income of the business should be Rs. 2 lakhs and a turnover of Rs.10 lakhs. The business should be profitable for at least two years.
  • The applicant needs to provide the MSME registration certificate. 

Besides checking eligibility, business owners can also use a business loan calculator to calculate their EMIs before applying.

Documents Required For MSME Loan Application

The common set of documents required for an MSME loan is as follows: 

  • The applicant’s and the company’s PAN (Permanent Account Number) card 
  • Address proof of the applicant and the business
  • Last six months’ bank statements with Form 16
  • Income Tax Returns (ITRs) acknowledgement copies of the previous two financial years
  • Audited financial statements showing profits for at least two years

How Can Business Owners Utilise MSME Loans?

Entrepreneurs avail of MSME business loans for several business purposes, including the following:

  • An MSME loan can help businesses meet their financial requirements for working capital, business expansion, new asset acquisition, technological advancement for higher output, and other operational purposes. 
  • Entrepreneurs can invest in property, land, or manufacturing unit to expand their new business operations. They can buy raw materials, inventories, factory supplies, etc., meet marketing and advertising expenditures, and even cover office refurbishment expenses.

Apply for an MSME Loan Online 

Follow this step-by-step guide to applying for an MSME loan online with a lending institution: 

  • Go to the loan provider’s website and fill out the business loan application. The lender’s representative will contact the applicant to explain the loan terms. Post-discussion call, the applicant will be able to determine their loan eligibility for an MSME loan and be able to find the best fit for their loan requirements. 
  • After choosing the right business loan, applicants can upload scanned copies of the required documents online for verification. The applicant can also submit physical copies of relevant documents by requesting a doorstep pickup service. 
  • The lender will verify the documents and approve the loan. The applicant will get the loan agreement. Once the agreement is signed, the lender will disburse the loan amount to the applicant’s account within 48-72 hours.

Key Advantages of MSME Business Loans

Following are the advantages of MSME loans, making business owners apply for these loans:

  • Collateral-free Loans

Entrepreneurs can acquire funds against MSME loans without collateral. Depending on the applicant’s eligibility, it can go as high as Rs.50 lakhs. Businesses can keep utilising their assets to produce more output and focus on growth instead of worrying about collateralised assets.  

  • Transparent Loan Approval Processing

Reputable NBFCs provide ready-to-use online tools to make loan processing transparent enough. Business owners can use a business loan calculator available on the lender’s website and make an informed decision. 

  • Affordable and competitive interest rates

MSME business loans are offered at affordable interest rates based on the nature of the business, industry type, profit, location, and establishment years primarily.

  • Flexible Repayment Tenure

MSME business loans come with flexible repayment tenures. Take a short-term or long-term loan with 12-60 months tenure. 

  • No Foreclosure Charges

Depending on the lender’s policy, they may not charge a foreclosure fee.

The Last Words

So, approach a trustworthy and reputed lender to avail of funds against an MSME loan online. Apply online to get a loan at attractive interest rates and stay focused on growth prospects. Consider the future cash flows in the business and choose the right loan tenure to repay the loan timely.

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