All about MSME Loan

Neethi V. Kannanth | Last updated: 28 July 2022

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Quick Summary

This article provides a comprehensive guide to MSME loans, explaining what Micro, Small, and Medium Enterprises are based on investment and turnover. It details the general eligibility criteria for these loans, outlining the necessary documents for application, such as proof of identity, income, and business address. The guide also covers the application process, collateral requirements (often unsecured), and provides a snapshot of interest rates from various banks and NBFCs, along with information on specific schemes like MUDRA.

What is Micro, Small and Medium Enterprise?

Micro, Small and Medium Enterprise are those enterprises which are engaged in manufacturing and enterprises engaged in providing services and meet the following criteria:

MSME Loans: Eligibility, Documents and How to Apply

Micro

Investment in Plant and Machinery or Equipment:

Not more than Rs.1 crore and Annual Turnover ;
not more than Rs. 5 crore

Small

Investment in Plant and Machinery or Equipment:

Not more than Rs.10 crore and Annual Turnover ;
not more than Rs. 50 crore

Medium

Investment in Plant and Machinery or Equipment:

Not more than Rs.50 crore and Annual Turnover ;
not more than Rs. 250 crore

What are the eligibility criteria for availing a MSME Loan?

The eligibility criteria for availing the loan is set by the lender and therefore, varies from bank to bank. Not just that, there are different eligibility criteria for the different schemes. Below are the general criteria for availing the MSME Loan:

Particulars	Criteria
Type of business	Manufacturing Sector
Type of business	Service Sector
Size of business (in terms of investment) - Manufacturing Sector	Micro - < Rs.25 lakh
	Small - < Rs.5 crore
	Medium - < Rs.10 crore
Size of business (in terms of investment) - Service Sector	Micro - < Rs.10 lakh
	Small - < Rs.2 crore
	Medium - < Rs.5 crore

What are documents required to apply for a MSME Loan?

Below are the documents required for applying for an MSME Loan. However, the list is not exhaustible, as different documents may be required by different lenders:

Particulars	Document Required
Proof of Identity	PAN card, Aadhaar card, Voter’s ID, passport
Proof of Residence	Rental agreement, ration card, utility bills
Proof of Business Address	Rental agreement, lease agreement, utility bills
Proof of Income	P/L account and balance sheet copies of last 2 years
Tax documents	IT returns, sales tax return, PAN card
Proof of securities provided	Photocopies of title deeds/lease deeds offered as securities
Other documents	Projected balance sheet, project report, etc.

How to apply for an MSME Loan?

There are two ways of applying for an MSME loan. If the lender has an online facility, you can fill the form with the required details and submit the application via the website.

Alternatively, you can visit the nearest branch and request them for an application form. You can call ahead and ask them what the documentation requirements are.

Collateral for MSME Loan

Most of the lenders in India will offer you an MSME loan without you having to provide any collateral or security. MSME loans are considered unsecured loans for which collateral is not required. However, in case any lender does ask for a collateral, do get in touch with them and ask for the details of the security you may need to provide.

MSME Loan Interest Rates by Top Banks in 2022

Bank Name	Interest rate
Allahabad Bank	At the discretion of the bank
Oriental Bank of Commerce	10.70% p.a. onwards
Andhra Bank	At the discretion of the bank
Central Bank of India	11.25% p.a. onwards
Indian Bank	9.75% p.a. onwards
Punjab and Sind Bank	9.95% p.a. onwards
Punjab National Bank	At the discretion of the bank
State Bank of India	7.65% p.a. onwards
Syndicate Bank	At the discretion of the bank
UCO Bank	8.85% p.a. onwards
Union Bank of India	At the discretion of the bank
United Bank of India	10.25% - 16.25% p.a.

Top NBFCs Offering MSME Loans Interest Rates

Bank Name	Interest rate
LendingKart	At the discretion of the lender
Fullerton India	17% p.a. to 21% p.a.
Mahindra Finance	At the discretion of the lender
Muthoot Fincorp	At the discretion of the lender

Other MSME Loan Schemes

Name of Scheme	Sub-Schemes
1) MUDRA Loan	Micro-Credit Scheme
	Credit for Micro Finance
	Refinance Scheme for Banks
	Mahila Uddyami Scheme
	MUDRA Card
	Equipment Finance Scheme
	Credit Guarantee Scheme
2) Credit Guarantee Funds Trust for Micro and Small Enterprises (CGTMSE)	N/A
3) Prime Minister’s Employment Generation Programme (PMEGP)	N/A