MSME Loan Scheme in 2025 - Types, Interest Rate, Eligibility, and How to Apply Online

Discover MSME Loan Schemes, latest 2025 updates, eligibility, interest rates and benefits for small businesses.
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4 min
29 August 2025

If you run a small business in India, you know how important funding is to keep it going. That’s where MSME loan schemes help. This page explains the different government-supported loan options available now—like PMMY, PMEGP, CGTMSE, and others. These schemes make it easier for MSMEs to get loans, sometimes without needing security or collateral. Whether you are just starting or want to expand, you’ll find useful details here about loan types, eligibility, benefits, interest rates, and how to apply. This guide will help you make better financial choices for your business.

What is an MSME Loan?

An MSME loan is money that banks and Non-Banking Financial Companies (NBFCs) lend to small and medium businesses. These loans often require little or no security and come with reasonable interest rates. Some government schemes also offer loans to MSMEs at lower interest rates for different needs like buying machinery, expanding the business, or upgrading technology.

An MSME loan is especially useful for new businesses to help run daily operations and improve their finances. It can be used to buy modern machines, stock, pay employees, and support business growth.

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Types of MSME Loan schemes in India

1. Pradhan Mantri Mudra Yojana (PMMY)

The Pradhan Mantri Mudra Yojana (PMMY) is a flagship government scheme aimed at providing financial assistance to micro and small enterprises. Launched in 2015, this scheme enables businesses to avail loans up to Rs. 10 lakh without collateral. PMMY is divided into three categories—Shishu (up to Rs. 50,000), Kishore (Rs. 50,000 to Rs. 5 lakh), and Tarun (Rs. 5 lakh to Rs. 10 lakh), catering to businesses at different stages of growth. The scheme is available through banks, NBFCs, and microfinance institutions, ensuring accessibility to entrepreneurs. By promoting self-employment and small business expansion, PMMY fosters economic growth and financial inclusion.

2. Prime Minister’s Employment Generation Programme (PMEGP)

The PMEGP is a credit-linked subsidy programme aimed at generating employment by supporting micro-enterprises in rural and urban areas. The scheme provides financial assistance for new business ventures, with the government offering a subsidy of 15% to 35% based on business category and location. PMEGP is implemented by the Khadi and Village Industries Commission (KVIC) and other state-level agencies. Eligible entrepreneurs can avail loans up to Rs. 50 lakh for manufacturing units and Rs. 20 lakh for service-based enterprises. The scheme promotes self-employment by reducing financial barriers and encouraging skill development among aspiring entrepreneurs.

3. Credit Guarantee Trust Fund for Micro & Small Enterprises (CGT MSE)

The CGTMSE scheme offers collateral-free loans to micro and small enterprises, ensuring easy access to credit for businesses without tangible assets. Launched by the Government of India and SIDBI, this initiative provides a credit guarantee of up to 85% on loans up to Rs. 2 crore. CGTMSE covers both new and existing businesses, reducing the risk for lenders and encouraging financial institutions to provide unsecured loans. The scheme enables entrepreneurs to secure funding without pledging property, facilitating business expansion, working capital requirements, and technology upgrades. By bridging the credit gap, CGTMSE boosts MSME sector growth and innovation.

4. Credit Linked Capital Subsidy Scheme (CLCSS)

The Credit Linked Capital Subsidy Scheme (CLCSS) is designed to support MSMEs in upgrading their technology and improving competitiveness. Under this scheme, businesses receive a capital subsidy of 15% on loan amounts up to Rs. 1 crore for purchasing new machinery or modernising equipment. The initiative aims to help MSMEs adopt state-of-the-art technology, increase production efficiency, and enhance product quality. CLCSS is available across various sectors, including manufacturing, food processing, and textiles. The scheme, implemented through SIDBI and other financial institutions, ensures that small businesses remain competitive in both domestic and international markets.

5. Equity infusion for MSMEs through fund of funds

The Fund of Funds initiative provides equity support to MSMEs, enabling them to strengthen their capital structure and scale operations. This government-backed scheme aims to invest in promising MSMEs through venture capital and equity-based funding mechanisms. By addressing the liquidity gap, the fund helps small businesses access long-term investment without relying solely on debt financing. The initiative is particularly beneficial for high-growth MSMEs looking to expand their market reach and invest in technology and infrastructure. With structured financial backing, this scheme enhances MSME competitiveness and contributes to sustained business growth and job creation.

6. Credit Guarantee Scheme for Subordinate Debt (CGSSD)

The Credit Guarantee Scheme for Subordinate Debt (CGSSD) is designed to assist stressed MSMEs facing financial difficulties. The scheme provides partial credit guarantees to lenders, allowing entrepreneurs to secure subordinate debt up to Rs. 75 lakh. CGSSD helps businesses restructure their financial obligations and regain stability without requiring additional collateral. The scheme is particularly beneficial for businesses impacted by economic downturns, ensuring continued operations and job retention. By offering credit support to struggling MSMEs, CGSSD facilitates recovery and business continuity, reducing the risk of closure due to financial constraints.

7. SIDBI Make In India Loan For Enterprises (SMILE)

The SIDBI Make in India Loan for Enterprises (SMILE) scheme supports MSMEs engaged in manufacturing and service sectors. The initiative offers financial assistance with soft loans and a flexible repayment structure to encourage business expansion. MSMEs can avail loans starting from Rs. 10 lakh, with lower interest rates for eligible applicants. The scheme prioritises businesses aligned with the Make in India initiative, promoting domestic production and reducing import dependency. By facilitating long-term funding for asset creation and working capital needs, SMILE enhances the financial capabilities of small businesses, fostering innovation and industrial growth.

8. MSME business loan for startups in 59 minutes

The MSME business loan for startups in 59 minutes is a digital lending platform that provides quick loan approvals for small businesses. This initiative allows startups and MSMEs to apply for loans ranging from Rs. 1 lakh to Rs. 5 crore, with approval in under an hour. The platform integrates with multiple banks and financial institutions, ensuring seamless loan processing with minimal documentation. By using automated credit assessment tools, the scheme accelerates loan disbursement, reducing wait times for entrepreneurs. The initiative helps businesses meet their funding needs efficiently, promoting ease of doing business and faster financial access for MSMEs.

Apart from the mentioned loans, our business loan is also a good option you can consider for your MSME business. Check out your pre-approved business loan offer now.

Agriculture Infrastructure Fund (AIF) Scheme

  • This Credit Guarantee Scheme supports post-harvest and farm-gate infrastructure in agriculture and related sectors.
  • Under the AIF scheme, loans of up to Rs 7.5 crore are available.
  • There is an interest subsidy of up to 3% for a maximum of seven years.
  • A moratorium period (delay in repayment) of 6 to 24 months is offered on loans taken under this scheme.
  • Finance can be used for post-harvest infrastructure, community farming, transportation, technology, and more.

Eligibility criteria for MSME loans

  • All MSMEs in trading, manufacturing, and service sectors are eligible.
  • The credit score should be 750 or higher.
  • The business must earn at least Rs 2 lakhs per year and have a minimum turnover of around Rs 10 lakhs per year.
  • Businesses should have a good repayment record and be financially stable.
  • There should be no history of loan defaults with any financial institution.
  • The applicant or authorised signatory must be between 21 and 65 years old.
  • They must have worked in the business or organisation for at least three years and have at least five years of experience in the business field.

The following types of businesses can apply for MSME loans:

  • Private limited companies
  • Public limited companies
  • Sole proprietorships
  • Partnership firms
  • Limited Liability Partnerships (LLPs)

Benefits of MSME Loans for Businesses

MSME loans offer several advantages to small and medium-sized businesses:

  1. Starting or Expanding a Business
    Use the loan to launch a new venture or grow an existing one.
  2. Purchasing Equipment and Machinery
    Finance the acquisition of essential tools, machinery, or technology to enhance operations.
  3. Building or Acquiring Property
    Secure funds for constructing a new building or purchasing land and premises.
  4. Introducing New Products
    Invest in developing and launching new products to diversify offerings.
  5. Managing Day-to-Day Expenses
    Cover working capital needs like stocking inventory, paying salaries, and procuring raw materials.
  6. Marketing and Advertising
    Allocate funds for promoting and advertising your products or services.
  7. Preventing Operational Delays
    Ensure smooth business operations by avoiding financial disruptions.

Conclusion

MSME loan schemes play a vital role in supporting small businesses by providing accessible funding, credit guarantees, and financial subsidies. Government-backed initiatives such as Pradhan Mantri Mudra Yojana, PMEGP, CGTMSE, and the credit linked capital subsidy scheme enable MSMEs to secure funding with ease. With schemes focusing on collateral-free loans, equity infusion, and digital lending, entrepreneurs can overcome financial challenges and expand operations. By leveraging these financial assistance programmes, MSMEs can reduce dependence on a business loan from private lenders, ensuring sustainable growth and economic stability. Additionally, these schemes often offer competitive business loan interest rates, making financing more affordable for small businesses.

Frequently asked questions

What are the types of MSME loan schemes available?
MSME loan schemes include Pradhan Mantri Mudra Yojana, PMEGP, CGTMSE, credit linked capital subsidy scheme, SIDBI Make in India Loan for Enterprises (SMILE), MSME business loan for startups in 59 minutes, and Fund of Funds for MSMEs. These schemes offer financial support for working capital, business expansion, technology upgrades, and credit guarantees for small businesses.

Our business loan is also a good option if you are an MSME business owner looking for funds. Check your business loan eligibility criteria now.

How can I apply for an MSME loan scheme?
You can apply for an MSME loan scheme through banks, NBFCs, or government portals. Visit the lender’s website, check eligibility, fill out the application form, and submit required documents. Government schemes like MSME loans in 59 minutes allow quick online approvals, while traditional banks may require physical verification before loan disbursement.

What are the benefits of MSME loan schemes?
MSME loan schemes offer lower interest rates, collateral-free financing, credit guarantees, and government subsidies. They provide quick access to capital, helping businesses with working capital, expansion, and equipment purchase. These schemes also improve financial inclusion, promote entrepreneurship, and support MSMEs in enhancing productivity and competitiveness in the market.

Another way you can improve the financial standing of your MSME business is through our business loan. Check your business loan pre-approved loan offer now.

What are the common eligibility criteria for MSME loan schemes?
Eligibility criteria for MSME loan schemes include business registration under the MSME category, minimum operational tenure (usually six months to a year), a good credit score (typically 650 or above), valid financial documents, and adherence to loan purpose requirements. Some schemes offer special benefits for women entrepreneurs, startups, and rural businesses.

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