Different Types of MSME Loans & Step-by-Step Guide to Get Each Loan
Micro, Small, and Medium Enterprises (MSMEs) are the backbone of India’s economy. To support their growth, several government and private loan schemes are available. Here’s a breakdown of major MSME loans and how to apply for each.
1. Term Loans
Purpose: Purchase equipment, machinery, expansion, or setup
Features: Up to 15 years | Fixed/floating interest | May require collateral
Features: Up to 15 years | Fixed/floating interest | May require collateral
- Estimate your requirement and cost.
- Choose lender (bank/NBFC).
- Gather docs: registration, financials, ITR, project report.
- Apply online/offline → submit documents → await credit check.
- Receive approval and disbursal.
2. Working Capital Loans
Purpose: Daily expenses (inventory, salary, materials)
Features: 12-month term | Renewable yearly | Requires bank turnover proof
Features: 12-month term | Renewable yearly | Requires bank turnover proof
- Estimate monthly capital needs.
- Prepare bank statements, GST returns, P&L, balance sheet.
- Apply with preferred lender and await approval.
3. Mudra Loans (PMMY)
Purpose: For micro enterprises
Loan Limits: Shishu (₹50K), Kishor (₹5L), Tarun (₹10L)
Collateral: Not required
Loan Limits: Shishu (₹50K), Kishor (₹5L), Tarun (₹10L)
Collateral: Not required
- Choose category (Shishu/Kishor/Tarun).
- Visit Mudra-partner bank.
- Submit plan, ID/address proof, bank statements.
- Track application via Udyami Mitra Portal.
4. CGTMSE Loans
Purpose: Collateral-free loans for MSMEs
Loan Limit: Up to ₹2 crore
Backed by: CGTMSE
Loan Limit: Up to ₹2 crore
Backed by: CGTMSE
- Check eligibility and find CGTMSE partner bank.
- Prepare docs: license, financials, project plan.
- Bank applies for CGTMSE cover on your behalf.
5. Equipment / Machinery Loan
Purpose: Buy or upgrade machinery
Coverage: Up to 90% of cost | Usually asset-backed
Coverage: Up to 90% of cost | Usually asset-backed
- Get vendor quotation for machinery.
- Apply with plan + KYC, GST, invoices, etc.
- Get verified and approved by lender.
6. Stand-Up India Scheme
Purpose: Loans for SC/ST & women entrepreneurs
Loan Range: ₹10 lakh – ₹1 crore
Condition: Greenfield projects only
Loan Range: ₹10 lakh – ₹1 crore
Condition: Greenfield projects only
- Register at standupmitra.in.
- Submit project proposal, ID, caste/gender proof.
- Choose preferred bank + handholding agency.
🛠️ General Tips for All MSME Loan Applications
- Keep credit score above 650+
- Maintain clean ITRs and financial records
- Submit a detailed project/business plan
- Expect site visits and follow-ups
✅ Conclusion
Pick the loan that fits your business needs—be it for growth, operations, or assets. Follow the application steps carefully and increase your chances of fast approval. With proper funding, your MSME can scale effectively and confidently!