Business Loan

Step-by-step Process to Get MSME Loan for New Business?


The Government of India has launched many schemes in the form of loans and subsidies to help and promote entrepreneurs in their business ventures. One of them is the MSME business loan which targets to finance and foster medium, small, and micro businesses (MSME). 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 business loan why it was introduced, its benefits, and how to get a startup business loan 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 business loan schemes for the betterment of emerging small businesses. This loan system’s prime objective is to provide unsecured loans to individual, small business units to help them meet their business-related expenses. 

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 and the loan amount. 

This loan has self-tailoring features, which means you can get an MSME startup business loan as a short-term, medium-term, or 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:

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 business loans in India is somewhere in the range of 10 to 25 percent per annum, with an exception of 1 to 1.5 percent by some lenders. 


MSME startup business 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.


Since it is an unsecured loan, 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 microbusinesses and helps them pay better attention to their businesses. 

High flexibility:

MSME business loans are 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. 

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 loan period in the form of installments. 

High loan amount:

If you get your MSME startup business loan sanctioned, your loan amount can go up to Rs. 50 lakhs, 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 for an MSME Business Loan? 

Here are some of the eligibility requirements to help you get an MSME business loan:

Type of business:

The type of business determines whether or not you are eligible for MSME loan schemes. The two types of businesses that are eligible for MSME loans are those in the manufacturing sector and those in the service sector.

Business experience:

In your current business, for which you are applying for a startup business loan, you must have a minimum of one to three years of business experience. This is due to the fact that you must demonstrate to the banks that you have extensive experience in the business venture in question.

Business turnover:

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

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 point for you and increases your chance of getting a bigger loan at a lower rate of interest. 

Clean loan history:

If you have been paying your previous debts diligently and on time, then you are always a step ahead. Banks prefer candidates who have a good track record and pay their instalments on time.


The interest rates from the top banks for MSME business loan range from 8.5% to 15% per annum. Some of the popular banks might go lower than that with an increased tenure of repayment. 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 well-researched and easy-to-understand articles and blogs on these topics, you can have a look at the official website of Piramal Finance. We have some amazing content on loans, investment, financial consulting, SIPs, etc.