5 Things to Consider While Availing MSME Loan

Availing MSME Loan

An MSME loan is a financial product specially designed for MSMEs in India. There are several lenders who offer MSME loan schemes in India. Their all eligibility criteria and required documents differ from one another. However, there are several things that must be considered before availing an MSME loan.

What is an MSME Loan?

A loan for an MSME is a financial facility extended by various Indian financial institutions. The funds availed under this facility can be used by the MSME owner to grow and expand his business. He can also use funds to improve the cash flow of the business, to increase inventory, or to upgrade machinery. There are two types of loans under this category- MSME loan without collateral and with collateral.

Depending on the requirement of the business owner, he can avail a secured or unsecured MSME loan.

Things to Consider

As conveyed earlier, MSME loan is offered by a number of lenders in India. Each and every lender’s requirements (in terms of eligibility criteria and documents requirements) is different. And therefore, it turns important for the MSME owner to research them in advance before availing a loan in order to make a sound and informed decision.

Having said that, almost all lenders have an online presence these days. This will help the MSME owner to have access to information and the lender’s terms and conditions at much ease. Let’s take a look 5 points to take into consideration before availing a business loan for SME and MSME.


Every lender checks the CIBIL score of the borrower first and then processes the business loan application further. So, it is important to have a good CIBIL or credit score to get the loan approved. The minimum CIBIL score to avail a business loan in India is 600-900.

However, every lender has their own criteria as well, such as some do not offer loans to borrowers with CIBIL score less than 700 while some consider 750. So, the first consideration is to check the CIBIL requirement of the lender as every rejected loan application decreases the score further.

Also, a CIBIL score is one of the points that determine the business loan interest rate. The higher the score, the lower the risk for the lender. So, generally, the lenders are willing to offer MSME loans at lower interest rates.

Eligibility Criteria

Every lender has some criteria upon which he determines the eligibility of the borrower. It is important to determine the eligibility criteria set by the lender and check if he meets it or not. In case he does not meet it, it only makes more sense for him to not to apply for MSME loan with the lender. Else his loan application will certainly get rejected. And rejected application will negatively affect the credit score.

Loan Documents

As the eligibility criteria, the loan documents also differ from one lender to another. And the borrower must know this requirement as well before applying for a loan. Suppose ITR of the previous 12 months is an important document for the lender. And the MSME owner does not file ITR or has records for just 6 months. In this case, his application will get rejected.

Search for MSME Loan Lender

The lenders who offer loans for MSME majorly include banks, NBFCs, and online lenders. The business owner would certainly want to avail the MSME loan from the best lender. And for this, he has to search for the best loan lender. However, firstly he has to decide what he wants to avail, a loan with collateral or a loan without collateral.

Once he decides on this, next he can shortlist a few business loan lenders who offer the same loan product. The right lender among the shortlisted ones will be the one who meets all the requirements of the MSME owner. So, while looking for the MSME loan lender in India, it is important to know the requirements. With no list of requirements, the business owner would not be able to zero in on one lender.

Apply for Loan

Once the right lender is found, how to apply for the MSME loan should also be determined in advance. The importance of this question is that although most lenders have an online presence, it is important to determine their application process.

This will help in understanding the time in which the application will get approved and the amount will be disbursed. Now that you know the important things to consider before availing an MSME loan, you can make a sound decision.


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