Looking for an MSME loan in 2025? Here’s Everything You Need to Know
Are you a startup founder, small business owner, or new entrepreneur in India wondering how to fund your business in 2025? MSME loan schemes by the Indian government and financial institutions are here to help you grow.
In this blog, we’ll break down the best MSME loan schemes in 2025, their interest rates, eligibility, and how to apply. Whether you want to buy equipment, expand your shop, or launch your first startup, there’s an MSME loan for you.
An MSME loan scheme is a special business loan program supported by the government or banks. These loans are made for small businesses like Micro, Small, and Medium Enterprises (MSMEs). Many of these loans don’t need any security (collateral), and some even offer low interest rates.
In 2025, popular MSME loan options include
PMEGP – Gives a subsidy (financial help) for setting up a new business.
Mudra / PMMY – Offers loans up to ₹20 lakh for small businesses.
CGTMSE – Provides loan guarantees up to ₹10 crore without needing security.
Stand-Up India – Offers ₹10 lakh to ₹1 crore loans to SC/ST and women entrepreneurs.
2% Interest Subvention – Gives 2% interest relief to GST-registered MSMEs.
You can apply for these loans online through government portals like JanSamarth or Udyamimitra or directly from your bank.
Why This Guide Matters?
If you are a first‑time founder, small trader, artisan, D2C brand, or service startup, the financing maze can feel overwhelming. Banks want paperwork. Investors ask for traction. Private loans are expensive. The good news: Government‑backed MSME loan schemes reduce risk for lenders, which means you get a better shot at approval, even without heavy collateral.
2025 is a big year for MSME credit in India:
- Higher MSME size limits (investment & turnover) mean more businesses qualify as MSMEs and can tap scheme benefits.
- Credit guarantee coverage increased—banks are now more willing to lend because the government shoulders part of the default risk.
- Repo rate cuts in 2025 have pushed borrowing costs lower vs. the 2023–24 cycle; expect improved loan pricing (bank spread still applies).
- Digital portals like JanSamarth, Udyamimitra, and bank SME platforms allow end‑to‑end online MSME loan applications.
- New inclusive credit initiatives target women, SC/ST, artisans, exporters, and micro‑vendors.
This article will help you compare schemes, estimate EMI, understand eligibility, and decide the smartest way to borrow.
What’s New for MSME Finance in 2025?
(Snapshot of key policy shifts that make borrowing easier this year.)
| 2025 Change | Why It Matters for You |
|---|---|
| MSME classification limits raised (investment & turnover each increased ~2–2.5x in Union Budget 2025‑26) | Faster eligibility checks, paperless applications, and multi‑bank comparison. |
| Credit Guarantee (CGTMSE) ceiling enhanced to ₹10 crore for Micro & Small units | Lowers base lending benchmarks; new MSME loans may be priced lower than in 2024 (spread & credit rating still apply). |
| Repo rate reduced to 5.50% (June 2025) | Lowers base lending benchmarks; new MSME loans may price lower than in 2024 (spread & credit rating still apply). |
| Mudra adds ‘Tarun Plus’ category (₹10–20 lakh) in some banks | Growth bridge for micro units graduating beyond ₹10 lakh. |
| Digital one‑stop scheme portals expanding (JanSamarth, StandUpMitra, Udyamimitra) | Faster eligibility checks, paperless applications, multi‑bank comparison. |
| Focused inclusion: SC/ST, women, artisans (PM Vishwakarma), street vendors (PM SVANidhi) | Targeted products with easier entry, handholding, or subsidised rates. |
MSME Classification & Why It Affects Your Loan
Banks and schemes look at whether you are a Micro, Small, or Medium enterprise. Classification drives eligibility ceilings, subsidy rates, credit guarantee coverage, and sometimes interest pricing slabs.
Tip: Register your business on the Udyam Portal and download the MSME (Udyam) certificate; lenders will ask for it.
Updated MSME Definition (Budget 2025 Enhancements)
Below are the revised composite limits (investment in plant & machinery/equipment and annual turnover). You qualify if both your investment and turnover fall within the band.
| Category | Investment Limit | Turnover Limit | Practical Example |
| Micro | Up to ₹2.5 crore | Up to ₹10 crore | Home‑based food brand scaling to regional e‑commerce. |
| Small | Up to ₹25 crore | Up to ₹100 crore | Manufacturing unit with 50 workers, multiple state sales. |
| Medium | Up to ₹125 crore | Up to ₹500 crore | Tier‑II auto component supplier expanding export orders. |
Why Consider an MSME Loan Instead of a Regular Business Loan?
5 Entrepreneur-Friendly Advantages:
- Lower or subsidised effective interest costs through repo linkage, subvention, or state incentives.
- Collateral relief via credit guarantee trusts (CGTMSE, NCGTC, CGFSIL) where the government shares risk.
- Margin money/upfront subsidy in select schemes (PMEGP) reduces your out‑of‑pocket equity.
- Priority Sector Lending (PSL) classification pushes banks to lend—helps in negotiating terms.
- Handholding & support services (training, skilling, market linkages) bundled with some government programmes.
Major Government & Bank‑Linked MSME Loan Schemes in 2025
Below are the most relevant schemes for startups, small businesses, and new entrepreneurs this year. For each, you will see who it’s for, how much you can borrow, what support you get (subsidy/guarantee), interest basics, and how to apply.
Bookmark: After reading individual scheme sections, scroll to the Comparison Table to see everything side‑by‑side.
1. Prime Minister’s Employment Generation Programme (PMEGP)
Best for: First‑time micro-entrepreneurs setting up new manufacturing or service units (rural & urban), including traditional & village industries.
Loan Size Guidance: Project costs up to ₹25 lakh (manufacturing) and ₹10 lakh (services) are typically financed under the scheme model; the bank actually sanctions the loan, and PMEGP provides a margin money subsidy credited to the loan account after lock‑in.
Subsidy (Margin Money): 15%–35% depending on location & category:
- Urban – General: 15%
- Rural – General: 25%
- Special Categories (SC/ST/OBC/Minorities/Women/Ex‑Servicemen/NER/Hill/Border districts, etc.): 25% urban / 35% rural
Your contribution (own margin): Minimum ~5–10% of project cost.
Collateral: Normal banking rules apply; however, loans up to ₹10 lakh are often collateral‑free under RBI guidelines—banks may use CGTMSE where eligible.
Key Conditions: New units only (no expansion of existing). Mandatory Entrepreneurship Development Programme (EDP) training. Project appraisal by bank & implementing agencies (KVIC, DIC, Coir Board, State KVIBs).
Where to Apply:
- PMEGP e‑Portal: click here
- Also accessible via bank SME scheme pages (e.g., SBI PMEGP) and the JanSamarth aggregator.
Good Fit When: You need both bank credit and a capital subsidy to reduce loan burden in early years.
2. Pradhan Mantri Mudra Yojana (PMMY) – Mudra Loan (Now with Tarun Plus in select banks)
Best for: micro & nano enterprises, kirana stores, repair shops, artisans, food carts, micro‑service providers, gig‑to‑formal transitions, early‑stage D2C sellers.
Loan Bands:
- Shishu: Up to ₹50,000
- Kishore: ₹50,001 – ₹5 lakh
- Tarun: ₹5 lakh – ₹10 lakh
- Tarun Plus (bank variant; e.g., SBI): ₹10 lakh – ₹20 lakh for proven Mudra borrowers graduating from Tarun.
Interest Rate: Varies by lender; typically repo/EBLR linked + spread. Example: SBI Mudra ROI 3.25% above EBLR (effective ~12.15% w.e.f. Feb 15, 2025). Aggregators show rates starting at ~9%–9.5% p.a., depending on the bank & risk.
Collateral: No collateral up to ₹10 lakh (per Mudra intent; the bank may seek hypothecation of assets created). Above that (Tarun Plus variants), normal security/margin rules apply.
Guarantee: Covered under Credit Guarantee Fund for Micro Units (CGFMU) through NCGTC; premium usually built into pricing.
Margin: Often nil for Shishu; ~10%–20% for higher slabs (varies by bank; SBI shows 20% above ₹50K).
Tenure: Up to 5–7 years depending on slab & bank policy.
Apply:
- Official Mudra: Click here
- e‑Mudra / bank portals (e.g., SBI, HDFC, ICICI)
- JanSamarth or Udyamimitra multi‑bank routing.
Great When: You need small working capital quickly with minimal paperwork to formalize micro operations.
3. Credit Guarantee Fund Trust for Micro & Small Enterprises (CGTMSE)
What it is: Not a loan by itself. It’s a credit guarantee that lets banks lend without or with limited collateral to eligible Micro & Small units (manufacturing, services, and trading allowed) by covering a % of lender loss if you default.
2025 Big Update: Guarantee ceiling enhanced from ₹5 crore to ₹10 crore (select scheme segments); revised Annual Guarantee Fee (AGF) slabs; additional cover incentives for specific segments (women‑led, NE region, aspirational districts, transgender entrepreneurs, etc.) as per current circulars.
Extent of Cover (Indicative): Typically up to 75%–85% of the sanctioned amount; higher (up to 90%) for special categories/identified districts; Check the latest circular before sanction.
Hybrid Security Allowed: The bank can take partial collateral; the unsecured portion up to ₹10 crore can be covered.
Who Benefits: Startups & small units lacking full collateral; borrowers seeking term loans, working capital, or composite limits; existing units for expansion.
How to Access: You don’t apply directly as a borrower to CGTMSE. You apply for an MSME loan at your bank; the bank (Member Lending Institution) applies online for guarantee cover after sanction. Ask your bank manager to route under CGTMSE if collateral shortfall is an issue.
4. Stand‑Up India (SUI) – Inclusive Credit for SC/ST & Women Entrepreneurs
Best for: New (greenfield) ventures where the promoter is SC, ST, or a Woman (majority share ≥51% in group entities). Supports manufacturing, services, trading, and allied agriculture.
Loan Amount: ₹10 lakh to ₹1 crore (composite term + working capital). Watch for possible upward revision; policy discussions have floated higher limits in 2025.
Interest Cap: Not more than bank MCLR/Base Rate + 3% + tenor premium (actual pricing depends on lender & credit rating; designed to be reasonable vs unsecured SME loans).
Tenure: Up to 7 years; moratorium up to 18 months.
Margin: Up to 85% project cost can be financed; borrower to bring minimum 10% (balance can come from convergence subsidies where eligible).
Credit Guarantee: Can be covered under Credit Guarantee Fund Scheme for Stand‑Up India Loans (CGFSIL) through NCGTC—reduces collateral burden.
When to Use: You are a first‑time SC/ST or woman founder launching a new unit and need sizeable funding beyond Mudra limits.
5. Interest Subvention Scheme for MSMEs (2% Interest Relief)
What It Does: Reduces the effective interest you pay by 2 percentage points per annum on eligible fresh or incremental working capital / term loans extended to GST‑registered MSMEs (subject to scheme guidelines, caps, and budgetary availability).
Key Points:
- Historically capped at ₹1 crore of eligible credit during scheme periods; check current continuation/expansion status under Ministry of MSME notifications.
- Claims processed via SIDBI (nodal agency) through lending banks; you don’t claim directly, ensure your lender tags your account.
- Accounts must remain standard (non‑NPA) to receive benefit.
Why It Matters: A 2% relief on a 10% loan rate effectively saves ₹2 lakh annually per ₹1 crore of eligible loan exposure, material for thin‑margin MSMEs.
Check Status / Talk to Bank: Ask whether your sanctioned facility qualifies under the current Interest Subvention window and that claims are being filed.
MSME Loan Scheme Comparison Table (2025)
Indicative; always verify latest scheme circulars & bank policies before applying.
Legend: Collat.=Collateral | Subv.=Subsidy | Guar.=Guarantee | Int.=Interest | App.=Application
| Scheme | Who It’s For | Max Loan / Project Size | Subsidy / Guarantee | Indicative Interest Guidance | Collat. | App. Link |
| PMEGP | New micro manufacturing/service units | ₹25L manuf / ₹10L services (project) | 15%–35% margin subsidy credited post‑lock‑in | Normal bank MSME rate; subsidy reduces net | May be collateral‑free up to ₹10L; above per bank | kviconline.gov.in/pmegpeportal |
| Mudra / PMMY | Micro & nano enterprises | Shishu ₹50K; Kishore ₹5L; Tarun ₹10L; Tarun Plus* ₹20L | CGFMU guarantee; concessional for women | Bank‑linked; ~9%–13%+ p.a.; SBI ex: EBLR+3.25% | No collateral up to ₹10L | mudra.org.in/JanSamarth/bank sites |
| CGTMSE‑backed Bank Loan | Micro & Small units lacking collateral | Up to ₹10 crore unsecured portion cover (2025) | Govt guarantee % varies (75%–85%+, higher special) | Bank spread; guarantee fee payable | Collateral optional/partial | Apply for loan at bank; ask CGTMSE cover |
| Stand‑Up India | SC/ST & Women greenfield ventures | ₹10L – ₹1Cr (composite) | CGFSIL guarantee possible; margin convergence | Capped at ≤MCLR+3%+tenor prem | Collateral or CGFSIL | standupmitra.in |
| Interest Subvention (2%) | GST‑registered MSMEs (fresh/incremental credit) | Eligible credit historically up to ₹1Cr* | Govt pays 2% interest relief | Effective rate reduced by 2% | N/A | Through lending bank (SIDBI nodal) |
| PM Vishwakarma | Registered traditional artisans | Toolkit + working capital support | Subsidised credit + toolkit grants | Concessional | Minimal | Portal via msme.gov.in/sidbi.in |
| PM SVANidhi | Urban street vendors | Cycle: ₹10K → ₹20K → ₹50K | 7% interest subsidy + digital incentives | Concessional | No collateral | pmsvanidhi.mohua.gov.in |
Tarun Plus and subvention ceilings vary by bank/state, confirm current limits.
MSME Loan Interest Rate 2025: What Should You Budget For?
Interest you actually pay = Benchmark (Repo‑linked / EBLR / RBLR / MCLR) + Bank Spread + Risk Premium – Subsidy (if any).
Key Market Signals (July 2025)
- Policy Repo Rate: 5.50% (cut June 6, 2025).
- Many banks’ External Benchmark Lending Rates (EBLRs) and Repo Linked Lending Rates (RLLR/RBLR) reset after the cut—watch for pass‑through.
- Example snapshot data:
- Central Bank of India RBLR: ~8.50% (Repo 5.50% + ~3% spread) for MSME reference; final ROI depends on rating slab.
- SBI Mudra ROI Illustration: EBLR +3.25% (effective ~12.15% noted Feb 2025; subject to downward reset after repo cut).
- Stand‑Up India Interest Cap: ≤MCLR/Base +3% + tenor premium (keeps pricing within a band across lenders).
How Subsidy Changes Effective Cost
If you qualify for 2% Interest Subvention, a 10% loan becomes an effective 8% (govt reimburses bank). Similarly, PMEGP margin subsidy lowers principal, reducing total interest outgo over tenure.
Negotiation Tips
- Provide Udyam certificate + last 12‑month GST data to show turnover stability; helps with pricing.
- Improve credit/risk rating (CIC score, financial ratios) to move to lower spread slabs.
- Bundle collateral or seek CGTMSE guarantee; de‑risks lender and may narrow spread.
- Compare public vs private bank MSME boards—PSBs often sharper on PSL targets; NBFCs faster but pricier.
MSME Loan Interest Rate Calculator: DIY EMI in 3 Steps
You can estimate your monthly EMI using the standard reducing balance formula used by most msme loan interest rate calculators online.
Formula:
EMI = P × r × (1+r)^n / ((1+r)^n − 1)
Where:
- P = Loan principal
- r = Monthly interest rate (Annual Rate ÷ 12 ÷ 100)
- n = Total months
Example: You borrow ₹20 lakh at 10% p.a. for 5 years (60 months).
- r = 0.10/12 = 0.008333…
- n = 60
- EMI ≈ ₹424,94X (calculate precisely in calculator—varies by rounding)
Use These Tools:
- Bank MSME EMI tools (check your bank’s SME calculator section)
- BigMudra Loan EMI Calculator
Pro Tip: Re‑run the numbers at +1% and −1% interest to see sensitivity before you commit.
How to Apply for an MSME Loan Online (Step‑by‑Step)
The process is surprisingly structured once you break it into steps. Here’s a universal MSME loan apply checklist you can reuse across banks & schemes.
Step 1: Confirm MSME Status
- Register (or update) on Udyam Portal; download your MSME certificate.
- Ensure PAN, Aadhaar, and GST linkage are clean.
Step 2: Decide Funding Need & Scheme Fit
- Working capital, equipment, expansion, new unit?
- Ticket size guides scheme: up to ₹50K (Shishu), ₹5L (Kishore), ₹10L (Tarun), ₹1Cr+ (Stand‑Up / CGTMSE bank loan), subsidy desired (PMEGP).
Step 3: Prepare Basic Documents
- KYC (Aadhaar, PAN, address proof)
- Business registration / Udyam certificate
- GST returns or sales data
- Bank statements (6–12 months)
- Simple project report: purpose, cost, revenue forecast, break‑even
- Quotation/invoices for machinery if term loan
Step 4: Choose Application Channel
Multi‑Scheme Portals
- JanSamarth – Unified gov scheme eligibility & digital application.
- StandUpMitra – SC/ST/Women Stand‑Up India handholding.
- Udyamimitra (SIDBI) – Compare lenders; apply for MSME, Mudra, Stand‑Up, more.
Direct Bank
- Log into your bank’s SME/MSME lending page (SBI, CBI, BoB, HDFC, ICICI etc.) and choose relevant scheme.
- Many banks offer e‑Mudra or instant small ticket digital approvals (subject to account history).
Step 5: Tag for Subsidy / Guarantee (Critical!)
Ask the bank clearly: “Please route this under CGTMSE / Mudra / PMEGP / Stand‑Up India / Interest Subvention as applicable.” If they don’t tag it in their system, you may miss benefits.
Step 6: Track & Respond
- Use application ID from portal/bank.
- Respond fast to document queries; delays cause application expiry.
Step 7: Sanction, Disbursement & Post‑Sanction Compliance
- Review sanction letter: rate, tenure, moratorium, security, scheme tag.
- Complete documentation (DP note, hypothecation, guarantee forms).
- For subsidy schemes, meet post‑disbursement conditions (lock‑in, utilisation certificates, training completion).
Frequently Asked Questions
What is the MSME loan interest rate in 2025?
Rates vary by bank, scheme, borrower risk, and whether you get subsidy. After the June 2025 repo cut to 5.50%, many MSME benchmark rates eased. Public sector bank MSME reference rates are in the ~8%–9% base zone, but effective MSME loan rates typically fall in the ~9%–14% p.a. range. Small ticket unsecured Mudra loans price higher; secured/guaranteed working capital for good borrowers price lower. Always request the latest quote.
Is there any MSME loan scheme for startups in India?
Yes—several. PMEGP (new units + margin subsidy), Mudra (micro & early revenue), Stand‑Up India (SC/ST & women launching greenfield ventures), and bank loans with CGTMSE guarantee for collateral‑light startups. Also watch SIDBI startup & sector‑specific lines.
Can I get an MSME loan without collateral?
Often, yes. Loans under Mudra (up to ₹10 lakh) are designed to be collateral‑free. Banks can use CGTMSE or CGFSIL guarantees to reduce their risk and lend without full collateral up to much higher amounts (policy ceiling ₹10 crore unsecured cover in 2025 for eligible segments).
How do I apply for an MSME loan online?
Register on Udyam for MSME status, gather docs, then apply through JanSamarth, Udyamimitra, StandUpMitra, or your bank’s SME portal. Select the scheme, upload docs, track status, and engage with the bank for sanction.
Do I need GST registration to get MSME benefits?
Not always—but GST registered MSMEs gain access to benefits like the 2% Interest Subvention Scheme and build stronger financial data for credit appraisal. Many lenders give better scores to tax‑compliant borrowers.
What documents are required for an MSME loan?
KYC (Aadhaar, PAN), Udyam certificate, business constitution (partnership deed, ROC docs), GST filings / sales data, bank statements, project cost estimates, machinery quotes, ITRs (if available), and in some schemes training certificates (PMEGP EDP).
How long does MSME loan approval take?
Digital small‑ticket loans (e‑Mudra) can be sanctioned within days; larger term loans with site visits & CGTMSE tagging may take 2–6 weeks depending on bank workload and document readiness.
What is the maximum MSME loan amount I can get?
Depends on scheme and creditworthiness: Mudra up to ₹10 lakh (Tarun) or Tarun Plus variants up to ₹20 lakh; Stand‑Up India up to ₹1 crore; CGTMSE guarantee supports bank lending up to ₹10 crore unsecured cover (higher total exposure with collateral); mainstream MSME term loans can exceed these with normal security.
Ready to Fund Your Business?
Don’t wait for “perfect timing.” With lower rates, higher guarantees, and digital MSME loan portals live in 2025, this is a strong window to secure growth capital.
Next Steps:
- Download your Udyam certificate.
- Estimate how much you need using the MSME Loan EMI Calculator.
- Pick the right MSME loan scheme (Mudra, PMEGP, Stand‑Up, CGTMSE‑backed bank loan).
- Apply online today via JanSamarth, Udyamimitra, or your bank’s MSME portal.
Need help? Drop your business stage + funding need and I will help you shortlist the best scheme.
If you need a MSME loan in under 24-48 hours, you can apply through BigMudra, the loan amount is upto 5 Crore with interest rate of 10.99% p.a.
Disclaimer: Interest rates, eligibility criteria, and scheme benefits change based on government notifications, RBI policy, and bank discretion. Data current as of July 23, 2025; always verify with the official portal or lending bank before applying.
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