MSME Loan Scheme 2025: Types, Interest Rates & How to Apply

Small businesses are the backbone of India’s economy. To support them, the Government of India has launched several initiatives, including the MSME Loan Scheme 2025. These schemes provide funding for MSMEs, making it easier for entrepreneurs to grow, expand, and sustain their businesses. Whether you are starting a new business or looking to scale, government-backed MSME loans can give you the right push.

What is an MSME Loan?

An MSME loan is a type of business loan by Indian government and private banks/NBFCs designed especially for Micro, Small, and Medium Enterprises. It provides working capital or term loans to manage daily expenses, expand operations, purchase equipment, or launch a new business venture. Many schemes under government funding for MSMEs ensure that entrepreneurs do not struggle with high interest rates or lengthy procedures.

Interest Rate of MSME Loan

Canara Bank – The MSME loan interest rate here starts from 9.20% per annum.
Punjab National Bank (PNB) – Loans start with an interest rate of 9.60% per annum.
Indian Bank – A bit lower, starting from 8.80% per annum.
Union Bank of India – Slightly higher, beginning at 10.95% per annum.
Mahindra Finance – Among the lowest, offering loans at 7.20% per annum onwards.
State Bank of India (SBI) – Loans start from 8.00% per annum.
Fullerton – An NBFC with higher rates, starting from 17.00% per annum.
Muthoot Fincorp – One of the highest, with 18.00% per annum onwards.
Lendingkart – Charges interest monthly, starting from 1.25% per month.

What is Eligibility Criteria for MSME Loan?

Eligibility under the MSME Loan Scheme 2025 is simple:

The applicant must be running a micro, small, or medium enterprise registered under Udyam.
Startups and new businesses can also apply if they have a clear business plan.
Basic credit history and repayment capacity are required.
Annual turnover, business stability, and project report are considered by lenders.

How to Apply MSME Loan?

Applying for an MSME loan is now easier than ever:

Visit your nearest bank, NBFC, or apply online through government portals.
Choose the right funding for MSMEs scheme (like PMMY, CGTMSE, or Stand-Up India).
Fill in the loan application with your business details.
Submit required documents and business plan.
Once verified, the loan is disbursed directly to your bank account.

Document Needed for MSME Loan

While applying, the following documents are required:

Identity Proof: Aadhaar card, PAN card
Address Proof: Utility bills, rental agreement, business address proof
Business Proof: Udyam Registration Certificate, GST registration
Financial Statements: ITR, bank statements, balance sheets
Business Plan/Loan Purpose: Explaining the use of funds
Photographs: Passport size photos
Additional Documents: Collateral papers (if required under non-collateral schemes like CGTMSE)

Types of MSME Loan

Under the MSME Loan Scheme 2025, different types of loans are available:

Working Capital Loan – For managing daily operational needs.
Term Loan – For purchasing machinery, property, or expanding business.
Equipment Finance – For upgrading technology and tools.
Government-Subsidized Schemes – Like Pradhan Mantri Mudra Yojana (PMMY), CGTMSE (collateral-free loan), and Stand-Up India.
These options make MSME loan for new business highlyaccessible to entrepreneurs.

Benefits of MSME Loan

The advantages of opting for an MSME business loan interest rate under government schemes include:

Collateral-free loans up to ₹2 crore.
Lower interest rates compared to regular business loans.
Easy repayment terms and moratorium options.
Helps in business expansion, new projects, and cash flow stability.
Encourages innovation and promotes entrepreneurship in India.

Why Choose StartupFlora for MSME Loan?

When it comes to choosing the right funding partner, StartupFlora stands out because:

Expert Guidance: We simplify the entire loan application process, from eligibility check to final approval.
Access to Schemes: We connect MSMEs with the latest business loan by Indian government programs, subsidies, and grants.
Tailored Solutions: Whether it’s a new business loan or expansion funding, our team prepares the right strategy.
End-to-End Support: From preparing project reports to submitting documents, StartupFlora ensures hassle-free approvals.
Trusted by Founders: As a consultancy platform for startups and MSMEs, we have helped numerous businesses secure government funding for MSMEs in 2025.

With StartupFlora, you don’t just apply for a loan—you build a sustainable path for your business growth.

FAQ

Q1. Is CIBIL score required for MSME loan?
Yes, most banks and NBFCs check the applicant’s CIBIL score before approving an MSME loan. A good credit score (usually 650 and above) improves your chances of getting approval at a lower MSME loan interest rate. However, some government schemes also provide loans with relaxed credit requirements.

Q2. How can I apply for MSME loan?
You can apply for an MSME loan either online through bank websites, NBFC portals, or government portals like Udyam and SIDBI. Offline applications can be made at your nearest branch by submitting the required documents and business plan.

Q3. What are the benefits of MSME loan?
The MSME Loan Scheme 2025 offers several benefits such as lower interest rates, collateral-free funding up to ₹2 crore, easy repayment options, and government subsidies. These loans help MSMEs manage working capital, expand operations, and fund new business opportunities.

Q4. Can a new business apply for MSME loan?
Yes, a new business or startup can apply for an MSME loan for new business. You will need a strong business plan, Udyam registration, and basic KYC documents. Many government funding schemes are designed especially to support new entrepreneurs.

Q5. What is the minimum interest rate for MSME loans in India?
The MSME business loan interest rate generallstarts from 7.20% onwards (offered by NBFCs like Mahindra Finance) and goes up to 18% or more depending on the lender and applicant profile. Government schemes often offer subsidized rates to make loans more affordable.