Everything You Need to Know About the MSME Business Loan 

by  Adv. Rupa K.N  




3 mins


MSME Business loan


Micro, small and medium businesses in India have gained the confidence of society. They are the largest employers in the country, and nearly 70 percent of the country is employed in this sector. MSME has been accepted as the fundamental power behind the growth and economic development of countries worldwide. So the need for funding for the set-up and establishment of the MSME.

Here we will discuss the MSME business loans and procedures related to them in detail. Issues related to the MSME business loan should be dealt with under the supervision of a company lawyer

What is MSME Business Loan?

Every micro, small and medium enterprise needs funding for its own development and growth. For them, the higher-interest loans by the banks are unaffordable as these small enterprises are still growing. So, the MSME loan is a better option, where the government, through its various schemes, tries to give subsidies loans to the MSME. These types of loans are referred to as MSME business loans. 

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Why MSME Business Loan is the best choice available?

There are various key advantages in order to choose MSME business Loan in case you are a Small, Micro, or medium Entrepreneur. In that case, MSME business loans should be given a preference on these few points.

  • The minimum threshold to qualify is lesser than other types of bank loans,
  • Relaxation on the various types of Tax slabs, 
  • Various government-funded schemes are there,
  • Equal opportunity is given to all different kinds of business ideas,
  • Direct funding,
  • No restrictions on the use of the funds released for the MSME business loan. 

Essentials required to be fulfilled in order to be eligible for the MSME Business Loan?

In order to be eligible for the MSME Business loan, there are several essential conditions that have to be fulfilled, which we will discuss here- 

  • The first essential is the business plan; in the MSME business loan, there must be a well-researched business plan. 
  • Registration of the business plan is a must; the details, such as the time period, address of the start-up, etc., are required to be registered in the respective government department. The  MSME business loan will then only be sanctioned. 
  • The balance sheet of the business and the last Income Tax return documents need to be there at the time of the application for the MSME business Loan. 
  • The history of a credit score will definitely impact your MSME business loan sanction, and documents from various departments of government, like GST, TAX, etc., will be verified. 
  • The permanent address proof should be valid. The signature of the co-borrowers, if there is any, then it is required too. 
  • Although in the MSME business loans, there is no collateral in various schemes, if there is a need for any, then the documentation of that will be required. 

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Examples of some important MSME business loan schemes by the government of India

1.MSME Business loan in 59 minutes

The government came up with a very innovative idea of granting MSME business loans just within the time period of one hour. However, loans up to 1 crore can also be sanctioned within this scheme, but the time period will increase from one to ten days. The interest rate in this scheme is around 8.5 percent.

2.Start-up India loans

This is a loan given to the SC/ST or women entrepreneurs of the country; every bank in the country has to provide at least one MSME business loan to a start-up under this category. 

3.Credit guarantee fund scheme for MSME business loan

Loans under the scheme can be made to both new and existing businesses. This scheme’s funding can provide for working capital loans of up to Rs. 200 lakhs, with preference given to qualifying women entrepreneurs. The Credit Guarantee Fund Trust is a trust created by the Ministry of MSMEs and Small Industries for the purpose of carrying out the CGFMSE scheme. The government of India has launched a lending scheme that enables funding through loans without collateral to enterprises in the MSME sector.

4.National small industry corporation Subsidy

The benefit of this plan is that it provides small-scale industries with free access to tenders, and MSMEs do not have to pay security deposits to get financial aid under this scheme. The NSIC is an ISO-certified government enterprise under the MSMEs umbrella. One of its key functions is to assist MSMEs in growing by offering services such as finance, technology, market, and other services around the country.


This scheme is for women entrepreneurs; the government has taken steps in order to provide funding as an MSME business loan to the women lead start-ups within the country. This MSME business is specifically for women. Along with the government, the Women Development Corporation is in collaboration. 

Why is it Important to give MSME Business Loans?

  • Gdp contribution: With approximately 36.1 million units spread across the country, MSMEs contribute approximately 6.11% of manufacturing GDP and 24.63% of service GDP.
  • Exports: It accounts for around 45% of India’s total exports. Lots of MSMEs are associated with clients from all over the world. It has a great impact on the export economy. 
  • Inclusive growth: MSMEs encourage comprehensive growth by providing job possibilities in rural locations, particularly for persons from lower-income families.

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The blog tries to highlight the key essentials for the MSME business loan. However, it is advised to consult a company lawyer in the matter related to the MSME business loan. These loans are not only profitable for the banks, economy, and government but also for the young entrepreneurs of the country.

These Schemes, which are mentioned above, are to be of great importance if you are willing to fill out an application for the sanctioning of the loan by the banks or the government for your business’s betterment and growth. The MSMEs business loans are definitely a great choice for small businesses. 

Applying for an MSME Business loan is an easier process. To know more about the procedure of application and sanction, seek advice.

Adv. Rupa K.N

Adv. Rupa K.N


5 | 277+ User Reviews

Advocate Rupa K.N, with over 24 years of independent practice, specialises in providing legal expertise, advice and guidance to a broad range of customers. Having been practising law independently for several years after doing her B.A. LLB from Bangalore University and PGDM from the National Institute of Personnel Management.

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