MSME Loan Scheme 2025—Interest Rate, How to Apply, Eligibility & Types

MSME Loan Scheme 2025—Interest Rate, How to Apply, Eligibility & Types

MSME lending schemes provide micro, small, and medium-sized businesses with cheap loans for expansion, working capital, and technology upgrades. MSME loan interest rates start at 7% per year and are offered by banks, NBFCs, and government schemes to promote entrepreneurship and employment.

Key Highlights:

• Loan Amount: From Rs. 50,000 up to Rs. 5 crore (scheme dependent).
• Collateral: Many schemes are collateral-free under CGTMSE.
• Tenure: 1 year to 15 years, depending on loan type.
• Sectors Covered: Manufacturing, trading, and services.
• Processing Time: As fast as 59 minutes under the “MSME Loan in 59 Minutes” scheme.

What is an MSME loan?

An MSME loan is a type of financing that banks and non-banking financial companies (NBFCs) offer to small and medium-sized businesses. They provide MSME loans with little or no collateral and moderate interest rates. Certain government loan schemes also offer loans to MSMEs at cheaper interest rates for a variety of purposes, including the purchase of machinery, business expansion, technology upgrades, and so on.

MSME Loan Interest Rate 2025

An MSME loan for a new business is great for running the firm and strengthening its financial situation by allowing it to purchase modern machinery, equipment, and stock; pay staff salaries; and so on. It can also assist MSMEs in growing and expanding.

In 2025, MSME loan interest rates normally vary between 7% and 12% per year, depending on the lender, business profile, credit score, collateral, and loan category. Public-sector banks typically offer lower interest rates, although private lenders may charge slightly higher rates. Government-backed schemes, including PMEGP, CGTMSE, Mudra, Stand-Up India, and PM SVANidhi, help small enterprises decrease their effective interest load. These subsidised or low-interest solutions facilitate MSMEs' access to finance and long-term growth.

How to Apply for MSME Loans?

Entrepreneurs can apply for MSME loans in two ways: online and offline. The steps to apply for an MSME loan online are as follows:

Step 1: Visit the website of the bank/lender and select the MSME loan scheme, and click on the ‘Apply’ button.

Step 2: Fill out the application form and submit it.

Step 3: A representative of the bank/lender will contact the applicant to verify the loan requirements.

Step 4: The representative will ask to submit the required documents. 

Step 5: The loan request will be approved after document verification. 

Step 6: The lender will send an agreement to the applicant to complete the process. 

Step 7: The loan amount will be credited to the applicant’s account within 48 hours of signing the agreement.

An entrepreneur can also visit the nearest bank or financial institution’s branch and request a loan application form. Applicants need to submit the application and required documents to the branch. The bank/financial institution will approve the loan after verifying the documents.

Eligibility for MSME Loans

Given are the eligibility criteria for MSME loan schemes:

• All MSMEs engaged in the trading, manufacturing and service sectors.
• The credit score must be 750 or above.
• A business must have a minimum of Rs.2 lakhs income per year, and their minimum turnover should be around Rs.10 lakhs per year.
• Businesses must have a good repayment history with financial stability.
• Businesses should not have any previous loan default with a financial institution.
• The minimum age of the applicant or authorised signatory of a business to take the loan must be 21 years, and the maximum is 65 years.
• The applicant or authorised signatory must have worked in the enterprise or organisation for a minimum of three years and have a minimum of five years of experience in the business field.
• Individuals, business owners and MSMEs who have established the following type of business engaged in the services, trading and manufacturing sectors can apply for MSME loans:
• Private limited companies
• Public limited companies 
• Sole proprietorships 
• Partnership firms
• Limited Liability Partnerships (LLPs)

Documents Required for MSME Loan

To apply for any MSME loan plan, candidates must offer acceptable documentation proving their business identification, financial credibility, and repayment capabilities. The usually requested documentation for MSME loans include:

Identity Proof: Aadhaar Card, PAN Card of the applicant.

Address Proof: Utility bill, rental agreement, or business address proof.

Business Registration: Udyam Registration Certificate / MSME Certificate.

Bank Statements: Last 6–12 months of business bank statements.

Financial Documents: ITR, balance sheet, profit & loss statement.

GST Details: GST registration and recent GST returns.

Project Report: Detailed business plan or project report for loan approval.

Loan Application Form: Duly filled and signed form.

Collateral Documents (if required): For secured MSME loans.

Types of MSME Loans

Here are the various types of MSME loans:

Working Loans

Working capital loans are short-term loans which helps a business meet its daily cash needs and operational expenses. These loans are offered by banks and various financial institutions.

Term Loans 

Term loans are for long-term investments, such as capital expansion, capital expenditure, or purchasing fixed assets. MSMEs can apply for short-term loans by banks and financial institutions.

MSME Loan Schemes

Several MSME loan schemes are available in India to meet different business needs, from working capital to expansion and technology upgrades. Below are some of the most popular government-backed and institutional loan options:

Pradhan Mantri Mudra Yojana (PMMY)

The Pradhan Mantri Mudra Yojana (PMMY) provides MUDRA loans of up to Rs. 20 lakh to non-corporate, non-farm, small, and micro-enterprises. These loans are offered by Commercial Banks, Small Finance Banks, MFIs, and NBFCs, with the option of applying online through the JanSamarth portal.

PMMY offers four schemes: ‘Shishu’, ‘Kishore’, ‘Tarun’ and ‘Tarun Plus’. ‘Shishu’ offers loans up to Rs.50,000. ‘Kishor’ provides loans above Rs.50,000 up to Rs.5 lakhs. ‘Tarun’ provides loans above program lakhs up to Rs. 10 lakhs. ‘Tarun Plus’ offers loans above Rs. 10 lakhs up to Rs. 20 lakhs.

Prime Minister’s Employment Generation Programme (PMEGP)

The Prime Minister’s Employment Generation Programme (PMEGP) is a credit-linked subsidy progRs. 5ramme for the establishment of micro-enterprises in the non-farm sector to create self-employment opportunities. This scheme only accepts new proposals for approval. Eligible persons can apply for this scheme award via the PMEGP e-portal.

The maximum cost of a project or unit eligible for assistance under this initiative is Rs.25 lakhs in the manufacturing sector and Rs.10 lakhs in the business or service sector. Under this scheme, a credit subsidyprogramsubsidy of 15% to 25% is provided for a projectsubsidy program subsidysubsidy program subsidyproject or unit of Rs. 50 lakh in the manufacturing sector and Rs. 20 lakh in the business or service sector. 

Credit Guarantee Trust Fund for Micro & Small Enterprises (CGTMSE)

The Ministry of MSME and the Small Industries Development Bank of India (SIDBI) jointly established the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to implement a credit guarantee scheme for MSMEs.

The scheme provides guarantee insurance up to 75%, 80%, 85%, or 90% of the credit facility's sanctioned amount. For micro-enterprises up to 5 lakhs, the extent of guarantee cover is 85%. The eligible institutions can apply for the credit guarantee scheme from the CGTMSE website.  

Interest Subsidy Eligibility Certificate (ISEC)

The Interest Subsidy Eligibility Certificate (ISEC) Scheme was introduced for funding khadi programs undertaken by khadi institutions. This initiative provides loans at a concessional interest rate of 4% per annum for the operating capital of Khadi establishments.

The difference between the 4% and the actual lending rate is paid by the Central Government through the KVIC to the lending banks. The khadi institutions can apply for this scheme to the financing bank along with the ISEC certificate issued by the KVIC. 

MSME Business Loan for Startups in 59 Minutes

The Government of India provides an MSME Business Loan for Startups in 59 Minutes. These loans are fully online and processed in one hour. MSMEs can get term loans, working capital loans, and mudra loans of up to Rs.5 crore. Eligible MSMEs may apply for this loan using the PSB Loans in 59 Minutes site.

Benefits of MSME Loans

MSME loan schemes provide the following benefits for MSMEs:

• To start a new business or expand the existing business.
• For purchasing machinery and plants, such as lab or testing equipment, furniture, electrical appliances, etc.
• To construct a building or acquire land/premises.
• For launching new business products.
• To meet working capital requirements like stocking up inventory, paying salaries, purchasing goods and raw materials, etc.
• For marketing and advertising purposes.
• Helps prevent delays in business activities.

Securing an MSME loan in 2025 has become easier, faster, and more business-friendly, thanks to simplified eligibility rules and digital verification systems. With the right documents, a strong financial profile, and a well-prepared project report, small businesses can unlock affordable funding to expand operations, upgrade technology, or increase working capital. MSME loans not only support day-to-day growth but also empower entrepreneurs to scale confidently in a competitive market. For professional loan assistance and project report preparation, always rely on trusted consultants like Sharda Associates for a smooth approval process.  Please contact us at +91 8989977769 if you have any questions or need our assistance in preparing a project report or CMA data.