The MSME sector is the backbone of the economy in India, representing almost 30% national GDP and contributing 45% of total exports. Despite their importance, a number of MSMEs and companies are still struggling to find funding based on conventional lending criteria, making it incredibly important to understand MSME loan schemes.
It is equally relevant for the small business owner or entrepreneur to understand the full range of MSME loan schemes available in regard to their features, eligibility, and documentation. This guide is an exhaustive overview of MSME loan full form to types and benefits.
What is MSME Loan?
MSME Loan is a business loan available to Micro, Small, and Medium Enterprises in India in order to address their capital needs – working capital, equipment purchases, expansion, and infrastructure.
MSME Loan Full Form:
MSME stands for Micro, Small, and Medium Enterprises.
These loans are provided by banks, NBFCs, and fintech lenders. They can be secured or unsecured, with multiple repayment options tailored to small business needs.
MSME Classification (as per Indian Government):
Type | Investment Limit | Annual Turnover Limit |
Micro | Up to ₹1 crore | Up to ₹5 crore |
Small | Up to ₹10 crore | Up to ₹50 crore |
| Medium | Up to ₹50 crore | Up to ₹250 crore |
Key Features of MSME Loans
Knowing about the MSME loans details will help you plan your borrowing better.
- Loan Amount
Loans are between ₹3 lakh to ₹1 crore, or more depending on the business profile .
- Interest rate
Interest rates range from 10% to 18% p.a and usually government backed schemes provided subsidised rates.
- Fast approval
With digital processing speeds of loan processing are faster than previous generations – two to seven working days is often the speed with traditional banks .
- Flexible repayment
Tenure can be chosen from 12 months to 10 years, based on your cash flow and borrowing requirements.
- Small Documentation
Usually basic business documents, KYC and bank statements is usually all that is required to process the process.
MSME Loan Limit
The MSME loan limit varies based on the loan scheme and lender. Most banks offer:
- Minimum loan amount: ₹3 lakh
- Maximum loan amount: ₹1 crore – ₹10 crore
Government schemes like Mudra or CGTMSE have their own sub-limits based on business category.
Benefits of MSME Loans
Acquiring an MSME loan offers numerous benefits:
- Enhances working capital
- Facilitates business expansion
- Helps to increase production capacity
- Allows for acquiring machinery & technology
- Potential tax benefits on interest paid
- Eligible for government subsidy under MSME schemes
Popular MSME Loan Schemes in India
Here are the top MSME loan schemes supported by the Indian government:
- CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises)
- Loan Limit: Up to ₹2 crore
- No collateral required
- Tenure: Up to 10 years
- Interest: Starting at 13% p.a.
- Pradhan Mantri Mudra Yojana (PMMY)
- Designed for micro-businesses.
- Shishu: Loans up to ₹50,000
- Kishor: ₹50,001 to ₹5 lakh
- Tarun: ₹5,00,001 to ₹10 lakh
- PMEGP (Prime Minister’s Employment Generation Programme)
- Credit-linked subsidy scheme
- Loan Limit: ₹50 lakh (manufacturing), ₹20 lakh (services)
- Subsidy: 15% in urban areas, 25% in rural areas
- 10% beneficiary contribution required
- AIF (Agriculture Infrastructure Fund)
- Supports agriculture MSMEs
- Focus on post-harvest management, food storage, and infrastructure
MSME Loans Offered by Ujjivan Small Finance Bank
- Secure Business Loan
- Loan: Up to ₹25 lakh
- Tenure: Up to 10 years
- Secure Enterprise Loan
- Loan: Up to ₹1 crore
- Tenure: 3–10 years
- Business Edge Term Loan
- Loan: Up to ₹10 crore
- Ideal for expanding businesses
- Loan Against Rent Receivables
- Loan: Up to ₹2 crore
- Tenure: Up to 7 years
- Interest: Starts at 14% p.a.
- Prime LAP Semi-Formal
- Loan: Up to ₹1.5 crore
- Tenure: Up to 12 years
- Interest: Starts at 12% p.a.
Documents Required for MSME Loan
To make your loan journey smooth, keep these documents ready:
- Business Registration Proof (GST, Udyam Certificate, Trade License)
- KYC Documents (Aadhaar, PAN)
- Bank Statements (Last 6–12 months)
- Financial Documents (Profit & Loss Statement, Balance Sheet)
- ITR for last 1–2 years
- Ownership proof (for secured loans)
Read Also:- 5 Best Business Insurance Providers for Small Businesses in the USA
Types of MSME Loans Based on Business Needs
| Type of Loan | Purpose |
| Working Capital Loan | Covers daily expenses like salary, rent, utilities |
| Term Loan | Long-term investment in property, plant or tech |
| Equipment/Machinery Loan | Buy new or upgrade existing equipment |
| Overdraft Facility | Revolving credit line for urgent needs |
| Invoice Financing | Unlock cash stuck in unpaid invoices |
How to Apply for an MSME Loan?
Here’s a simplified step-by-step:
- Check Eligibility
Ensure your business is registered as an MSME and meets turnover/vintage criteria. - Compare Lenders
Review offerings from Ujjivan Bank, SBI, ICICI, HDFC, NBFCs, etc. - Fill Application Online or Offline
Most banks allow easy digital applications. - Submit Documents
Upload or submit the required paperwork. - Get Approval & Disbursal
Once approved, the funds are transferred to your business account directly.
Final Thoughts
India’s MSME sector is evolving — and so are the opportunities for financing. Whether you are a startup, small trader, or growing manufacturing unit, accessing funds when you need them can help you pursue your next stage of growth. MSME Loans allow businesses to access simple, one-time and accessible credit to build, scale and establish businesses.
Ujjivan Small Finance Bank and the many various other banks and institutions continue to develop customized MSME loan schemes and offer detailed tailoring to your vision for growth. So think about the MSME loan Limit, think about the features, and think about the documentation you will need to start take steps towards your financial empowerment now.