What Is an MSME Loan?
An MSME Loan is a financial product designed for Micro, Small, and Medium Enterprises to fund business operations, working capital, expansion, or purchasing equipment. These loans can be availed from banks, NBFCs, or through government schemes with favorable interest rates and repayment options.
Key Features of MSME Loans
- Loans for working capital, machinery, expansion, or business development
- Government-backed schemes for interest subsidies
- Flexible repayment tenure from 12–60 months
- Available as secured or unsecured loans depending on amount
- Quick disbursal for small loans
Interest Rates 2026
| Lender Type |
Interest Rate (p.a.) |
Loan Amount |
Tenure |
| Public Sector Banks |
8% – 14% |
Up to ₹50 lakh |
12–60 months |
| Private Banks |
10% – 16% |
Up to ₹25 lakh |
12–48 months |
| NBFCs / Digital Lenders |
12% – 20% |
Up to ₹10 lakh |
6–36 months |
| Government MSME Schemes |
6% – 12% |
Up to ₹1 crore |
12–72 months |
Eligibility Criteria
- Indian citizen with registered MSME or business
- Minimum 1 year of business operations preferred
- Valid KYC documents (PAN, Aadhaar)
- Financial statements or balance sheets
- Good repayment history if previous loans exist
Documents Required
- Identity proof (PAN, Aadhaar, Passport)
- Business registration certificate
- Bank statements (last 6–12 months)
- Income tax returns (last 2–3 years)
- Loan application and project report (if expansion)
MSME Loan Example
If a small enterprise takes a ₹10 lakh MSME loan at 12% interest for 24 months:
- Monthly EMI: ₹47,200 approx.
- Total interest payable: ₹1,32,800 approx.
- Total repayment amount: ₹11,32,800 approx.
Advantages and Disadvantages
Advantages
- Supports business growth and expansion
- Low-interest options under government schemes
- Flexible repayment options
- Encourages entrepreneurship and job creation
Disadvantages
- Approval may require detailed documentation
- Secured loans require collateral
- High-interest rates for unsecured loans
How to Choose the Best MSME Loan in 2026
- Compare interest rates and government subsidies
- Check repayment tenure and EMI affordability
- Verify lender credibility
- Choose secured or unsecured based on business need
- Read all terms & conditions carefully
Frequently Asked Questions (FAQs)
What is the maximum MSME loan amount?
Depends on lender, business size, and government scheme eligibility.
Can startups avail MSME loans?
Yes, startups with proper registration and business plan may be eligible under certain schemes.
Are government subsidies available?
Yes, interest subsidies or partial funding is available under various MSME schemes.
Is collateral required?
Secured loans require collateral; small unsecured loans are available for low amounts.
Author: All Finance Store MSME Loan Team
Expertise: Small & Medium Business Finance
Last Updated: January 2026
Disclaimer: This page is for informational purposes only. MSME loan terms, interest rates, and eligibility vary by lender and government schemes. Always verify details with official sources before applying.