MSME stands for Micro, Small and Medium enterprises. Also, referred to as SMEs, these enterprises are responsible for economic activity on the ground in any country. MSME loan is a business loan made available to such enterprises.

India stands second in the number of SME and MSME businesses, with more than 36 million registered and unregistered businesses.

If you are running a small Kirana store, repair shop, salon, restaurant, clothing store, or stationery shop in your local market, you are involved in SME activity. Running SMEs is hard work, and many families have grown their businesses over generations after starting small.

Your small and medium enterprise often needs a shot of money to help you capture the festive or any other momentous opportunity. These spurts of occasional investments have great potential for returns, preparing your business for growth, and generating good income for you.

MSME loans are designed for such specific moments. MSMEs generally do not get support in the form of business loans from the mainstream banks due to many reasons. Some of these reasons are that banks often only lend large business loans and demand a strong credit history with collateral.

However, SME loan is designed specifically for the needs of small businesses and can lend very small amounts. Plus, MSME loans are collateral-free and available for relatively new businesses as well, something which is not available in a regular business loan.

Check your eligibility for SME & MSME Loans

SME and MSME loans serve the occasional financial needs of small and medium businesses. If your business meets the conditions given below, you can avail the collateral-free MSME loans.

  1. Are You Running One of the Following Businesses?
    • Kirana Store
    • Parchoon Shop
    • Grocery Store
    • Stationery Shop
    • Salon
    • Pharmacy/Medicine Store
    • Clothing Store/Apparel Shop
    • Miscellaneous Gift Shop
    • Kitchen/Household Utensil Store
    • Dairy/Milk Product Store
    • Eatery/Fast Food Joint
    • Vehicle/Electronics/Consumer Goods Repair Shop
    • Mobile Accessories/Repair Shop (Communication Store)
  2. Your Monthly Turnover is More than Rs. 2 Lakh
  3. Your Business is More than 1 Year old

How to apply for Business Loan

At LoanSimple, we understand the paucity of time and needs of small business owners. You can apply for a new business loan online following the steps given below:

  • Step 1: Check Eligibility
    (At least 1-year old business with a minimum revenue of Rs. 2 Lakh per month)
  • Step 2: Fill Up the Online form
  • Step 3: Upload the Documents as per your Loan Needs
  • Step 4: Loan Approved and Disbursed in 48 Hours
  • Step 5: Start Repayments

Documents Required for Instant Business Loan

There are two loan groups available at LoanSimple based on your funding needs:

For Loans of Rs. 10,000 to Rs. 1 Lakh
  • Identity & Address Proofs: PAN, Aadhaar & Residence Proof
  • Financial Status: 6 months bank statement
  • Business Proofs: Shop Photos & Selfie with shop signboard
For Loans of Rs. 1 Lakh to Rs. 5 Lakh
  • Identity & Address Proofs: PAN, Aadhaar & Residence Proof
  • Financial Status: 12 months bank statement
  • Business Proofs: Shop Photos & Selfie with shop signboard

Frequently Asked Questions

What are MSME and SME?

MSME or SME refers to the Micro, Small and Medium Enterprises. In general, the definition of MSME and SME business will include every business running with a capital investment of less than Rs. 10 crores. But the Indian Government regulation defines the Micro and Small businesses separately. The laws also put manufacturing and service businesses separately.

For example, micro-enterprise in manufacturing can have a capital investment of up to Rs. 20 Lakh, while service enterprise would need less than Rs. 10 Lakh capital to fall under micro category.

The following table gives the classification of MSME as per capital investment size:

MicroUp to Rs. 20 LakhUp to Rs. 10 Lakh
Small20 Lakh to 5 Crores10 Lakh to 2 Crore
Medium5 Crores to 10 Crores2 Crores to 5 Crore
Table: Micro, Small & Medium Enterprise as Defined by Ministry of MSM Enterprises
What is MSME or SME Loans?

MSME or SME loans are small business loans. SME loans are different from normal business loans in the following three aspects:

  1. You need not have a long credit history or any credit history at all
  2. SME loans are usually collateral-free loans (also called unsecured business loan)
  3. The size of the loan is usually small; e.g., LoanSimple can offer loans starting just Rs. 10,000

Our national public and private banks usually do not provide SME loans because of these conditions. Instead, specialised non-banking financial companies (NBFCs) offer SME loans to eligible businesses.

How to Get MSME or SME Loan in India?

MSME loans are provided by specialised non-banking financial institutions. These institutions provide SME loans to the businesses meeting their eligibility criteria. MSME loan distribution is usually available online and can be availed and managed completely online, without any branch visits.

For example, at LoanSimple, you can simply fill your contact information and our representative will guide you through the process. You can also track your loan status and apply for a top-up via LoanSimple mobile app.

So, if you own a small or medium-sized business and want to avail SME loan for your business, just visit the website and complete the application.

Can I Get Collateral-Free MSME or SME Loan in India?

Yes, most MSME and SME loans offered in India are collateral-free. These are provided by NBFCs expert in helping and providing financial services to small businesses. MSME loans are available to relatively new businesses and start-ups without a credit history. Due to the small ticket size of these loans they are collateral-free in India.

Borrowers can also apply for a top-up loan if they need, once their initial application has been approved.

Where to Get MSME or SME Loan in India?

You can apply for MSME and SME loans online. LoanSimple offers a simple process for a collateral-free SME loan. To start your application for the SME loan you can either visit LoanSimple website and select the loan you want to avail or download our app from the play store. LoanSimple app will also let you manage, top-up, and repay your SME loan.

How Much Does MSME or SME Loan Cost in India?

You can avail SME loans at minimal charges in the form of processing fee. Processing fee on SME or MSME loans varies between 1% to 2% of the borrowed amount. Interest rates on SME loans also fall between 1% to 2% per month, depending on the financial strength and history of the enterprise.

How to Avail MSME or SME Loan from Govt.?

SME or MSME loans are offered by various non-banking financial companies (NBFCs), Micro Finance Institutions (MFIs), Regional Rural Banks (RRBs) and Small Finance Banks (SFBs) under the guidelines set by RBI and the Government of India.

LoanSimple is an NBFC formed for this purpose of providing collateral-free business loans to small and medium enterprises in India.