How to Get a Business Loan for MSME at low-Interest Rate in India

Business Loan for MSME

Table of Contents

MSME stands for Micro, Small, and Medium Enterprises. These are businesses that fall within a certain size range and are classified as such by the government of India. The definition of MSMEs was revised in 2020 to include higher investment limits and turnover limits, which has led to more businesses being included in the MSME category.

Business Loan for MSME
MSME Business Loan

According to the latest definition, a business with an investment of up to ₹50 Crore and a turnover of up to ₹250 Crore is considered an MSME. These businesses play a crucial role in the Indian economy, contributing significantly to employment generation, export growth, and GDP.

India is a country with a growing MSME sector, which is the backbone of the Indian economy. However, MSMEs often face challenges in getting access to finance, which is a significant obstacle to their growth. To overcome this challenge, MSMEs can opt for MSME Loan at low-interest rates.

In this article, we will discuss the various steps that MSMEs can take to get an MSME Loan at a low-interest rate in India.

Identify the Purpose of the Loan

The first step in getting a Business Loan is to identify the purpose of the loan. MSMEs should clearly understand the business needs and requirements for which they need a loan. For example, an MSME may need a loan to purchase new machinery, expand its business, or hire new employees. Identifying the purpose of the loan will help MSMEs to choose the right type of loan and lender.

Choose the Right Lender

MSMEs can approach banks and NBFCs (Non-Banking Financial Companies)to get a Business Loan. It is important to choose the right lender who can provide a low-interest rate on the loan. MSMEs can compare the interest rates offered by different lenders and choose the one that offers the lowest interest rate. They should also consider other factors like loan processing fees, prepayment charges, repayment tenure, and customer service.

Improve Credit Score

The credit score is a crucial factor in getting a low-interest rate loan. A credit score is a three-digit number that represents an individual’s creditworthiness. MSMEs should try to maintain a good credit score by paying their bills and loans on time. They can also check their credit score online and take steps to improve it if necessary.

Prepare a Good Business Plan

A good business plan is essential to convince the lender to approve the loan at a low-interest rate. The business plan should include details like the business model, revenue projections, marketing strategy, financial projections, and management structure. The lender will evaluate the business plan to assess the feasibility of the business and its ability to repay the loan.

Choose the Right Type of Loan

MSMEs can choose between secured and unsecured business loans. For secured loans, you have to provide collateral, while unsecured loans can be availed without providing collateral. MSMEs can opt for a secured loan to get a lower interest rate. The collateral can be in the form of property, inventory, or equipment. However, MSMEs should carefully consider the risk of losing their collateral if they default on the loan.

Provide Necessary Documents

MSMEs should prepare all the necessary documents required to apply for a loan. The documents include a business registration certificate, PAN card, bank statements, and financial statements. The lender will evaluate these documents to assess the creditworthiness of the MSME.

Negotiate the Interest Rate

MSMEs can negotiate the interest rate with the lender. They can show the lender that they have a good credit score, a well-prepared business plan, and the ability to repay the loan. This can help in convincing the lender to offer a lower interest rate.


MSMEs can follow these steps to get an MSME Loan at a low-interest rate in India. It is important to choose the right lender, improve the credit score, prepare a good business plan, choose the right type of loan, provide the necessary documents, and negotiate the interest rate. MSMEs should also carefully consider the risks and benefits of the loan before applying for it. MSMEs can use to MSME loan calculator to pre-plan their loan and avoid any delay in repayment. A low-interest rate loan can help MSMEs to grow their business and take advantage of new opportunities.

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