MSME Registration in India – Process, Documents & Benefits

Personal Finance

The Government of India has launched many schemes in the form of loans and subsidies to help and promote individuals in their business ventures. One of them is the MSME loan scheme, which aims to finance and support medium-, small-, and micro-sized businesses. Do you also want funds from the MSME loan for your startup? Well, this article will help you navigate through it in detail. 

In this article, we will discuss the MSME loan scheme, why it was introduced, its benefits, and how to get one for your new business. 

What is the MSME loan scheme, and what is its primary objective? 

The MSME Ministry of India is an individual body that has executed and implemented the MSME loan scheme for the betterment of emerging small businesses. This loan system provides unsecured loans to individual, small business units to help them meet their business-related expenses, which is its prime objective. 

Not only the government, but private financiers and private banks have also started giving MSME loans to individual, rising businesses. The main differences between government and private MSME loan schemes are the interest rate of the loan and the loan amount. 

This loan has self-tailoring features, which means you can get an MSME loan scheme as a short-term loan scheme, a medium-term loan scheme, or a long-term loan scheme. You can take it as a cash credit, letter of credit, working capital loan, etc. You can use this lump sum amount to buy raw materials, use them for transportation, or pay for any services. 

What are some of the exclusive benefits of the MSME loan scheme? 

Here are some of the exclusive benefits of getting an MSME loan:

1. Low rate of interest:

Banks charge a low rate of interest to small and micro businesses to ensure that the minimum amount is spent on repaying the loan and the maximum amount goes into funding the business venture. The rate of interest for MSME loans in India is somewhere in the range of 10% to 25% per annum, with an exception of 1 to 1.5% by some lenders like FlexiLoans and ZipLoan. 

2. Accessibility:

MSME loans in India are highly accessible and easy to apply for. The whole process is hassle-free with serious exemptions, which makes it an ideal loan system with the fewest cons.

3. Collateral-free:

Since it is an unsecured loan system, there is no requirement for collateral, a security deposit, or a guarantor. If you don’t have any of those, you don’t need to worry about your loan getting sanctioned. This decreases the burden on small and micro businesses and helps them see beyond this. 

4. High flexibility:

MSME loan schemes are also a short-term affair, and you require them only to cover your short-term requirements. Since an MSME loan isn’t a long-term commitment, you can easily focus on developing your business. 

5. The long tenure of repayment:

The tenure of repayment is not fixed for every bank, but it can often be started at 3 years and stretched up to 15 years, which seems like a reasonable amount of time. You can repay your loan within this period in the form of instalments. 

6. High loan amount:

If you get your MSME loan sanctioned, your loan amount can go up to Rs 50 lakh, which you can use in your business venture. You can use it to buy new types of machinery, and raw materials, expand your manufacturing, hire more workers, and pay for other services. 

What is the eligibility to get an MSME loan in the first place? 

The eligibility criteria to fulfil to get an MSME loan are as follows:

1. Type of business:

Your business type determines whether you are eligible for MSME loan schemes. The types of businesses that are eligible for MSME loans are:

  1. Manufacturing sector
  2. Service sector
  3. Any form of non-farming activity

2. Business experience:

In your current business, for which you are applying for the MSME loan, you must have a minimum of one to three years of business experience. This is because you have to show the banks that you are well experienced in the business venture you are in. 

3. Business turnover:

A business turnover of about 12 lakh rupees per year is the benchmark for an MSME loan. However, it is again very subjective because different banks have different criteria. 

4. Credit score:

It is a common analogy that a good credit score will increase your chances of settling on a better deal on any type of loan, which stands to be true. If your credit score is 750 or more, it is always a plus for you and increases your chance of getting a larger loan at a lower rate of interest. 

5. Clean loan history:

You are always ahead if you have been consistent in paying your previous debts. Banks prefer candidates who have a good track record and pay their instalments on time.


The top banks’ interest rates for MSME loan schemes range from 8.5% to 15% per year. Even some well-known banks offer lower rates with longer repayment terms. You should use calculators in this case, where you can spin different loan amounts and interest rates to see what suits you best. 

You should focus on improving your credit score, improving your business venture, and increasing your business experience to make a better pitch and get a decent loan. 

If you prefer consuming articles and blogs on these topics, you can have a look at the official website of Piramal Finance. They have some amazing content on loans, investments, financial consulting, SIPs, etc.