How to Choose The Best MSME loan?

MSME loans are the business loans needed by Micro, Small and Medium Enterprises (MSMEs) to commence a new business idea, operate its regular business or expand as per its business growth plans. Availing a business loan in India initially used to be a bit tricky and that is why many young entrepreneurs even used to quit their idea of starting a new venture.

However, MSME loan eligibility is easy and achievable too. Entrepreneurs can get the necessary funds and can work on the expansion, infrastructure, etc. Nevertheless, MSME loan schemes help and encourage budding entrepreneurs up to a great extent as they are the ones contributing to the economy.

What are the Features of the MSME Loans?

Several features are associated with the MSME loans owing to which it is preferable by MSMEs and are as follows:

  • MSME loans are MSME loans without collateral.
  • MSME loans are provided at an affordable MSME loan interest rate.
  • Online business loans wherein the process to submit for MSME loans apply is simple & hassle-free.
  • Instant business loan whereby the loan disbursal time is quick.
  • The documents required for business loans under MSME loans are very basic and minimal.
  • The loan repayment tenure is long and flexible.

How to Choose the Best MSME Loan?

Several MSME loans have been launched by the Government to help the MSMEs grow and accordingly add to the GDP of the economy of the country. The two most popular MSME loans have been detailed as follows:

Mudra Loan (Micro Unit Development and Refinance Agency)

Mudra loans are the unsecured business loans that are a loan for business without security made available to MSMEs. Mudra loan has been further categorized as follows:

  • Shishu Mudra Yojana: MSME loans amount of up to INR 50,000.00 is being sanctioned.
  • Kishore Mudra Yojana: MSME loans amount from INR 50,000.00 to INR 5 Lakhs is being sanctioned.
  • Tarun Mudra Yojana: MSME loans amount from INR 5 Lakhs to INR 10 Lakhs is being sanctioned.

CGTMSE loan (Credit Guarantee Funds Trust for Micro and Small Enterprises)

The Government under CGTMSE loan provides financial assistance of up to INR 2 Crores to MSMEs without collateral.

MSME need to first check and compare the MSME loans being offered by the financial lenders present in the marketplace, its pros, and cons associated with them and then choose an MSME loan that is best suited for its business. Below stated are the parameters that MSME needs to check, compare, and choose:

  • Requirement of collateral
  • MSME loan interest rate
  • Loan sanctioning time
  • Minimum and maximum MSME loan amount are sanctioned
  • Prepayment charges
  • Processing and charging fees are applicable
  • MSME loan repayment tenure

Moreover, there are emerging NBFCs like Ziploan that provides small business loans to the MSMEs at attractive interest rates and flexible terms.

To sum it, firstly it is essential for an MSME to understand the business loan need for its business and then check, compare, and choose from several MSME loans being offered by the financial lenders.


  1. Who is eligible for MSME loans?

    Individual, businessmen, micro-small-medium enterprises, a partnership company, limited liability Partnership Company, Proprietorship Company are the ones who are eligible for MSME loans.

  2. What is the MSME loan eligibility?

    The MSME loan eligibility for a business is as follows:
    The age of the applicant should be of minimum 25 years of age and a maximum of 65 years at maturity.
    The business should be in operation for at least 2 years.
    The business should be profitable.

  3. What is the business loan interest rate?

    Business Loan Interest rate is charged as per the credit score on the business loan amount sanctioned.

  4. Which are the MSME business loan requirements?

    MSME business loan requirements are that the MSME needs to have a good credit score and should be able to produce all the general documents at the time of MSME loan applications which are proof of identity, proof of address, business plan, business registration copy, bank statement copy, ITR copy, photographs (passport sized), etc.

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