MSME loans can be your ideal solution if you are an entrepreneur who needs emergency funding for daily commercial activities or business expansion. These schemes have affordable interest rates and a nominal processing fee, generally less than 2% of the approved loan amount.
If you are searching for a collateral-free lending option to aid any urgent commercial expenses like paying out staff salaries, or buying new capital equipment, consider comparing your preferred lender’s MSME loan interest rate with other top market players.
Who Are Eligible for MSME Loans?
The Central Government revised the meaning of the term ‘MSME’ on May 13, 2020, and announced the same through an official declaration. Previously, the government used only investment aspects to define the MSME status of a venture, but now annual turnover of a company will also act as a critical indicator.
Now, MSMEs refer to:
- Business people, women entrepreneurs, MSMEs, self-employed individuals, and all other Indians who are trying to establish their own business and fall under SC/ST/OBC category
- Sole Proprietorships, Public or Private Limited Corporate Firms, Limited Liability Partnerships, and Partnership Companies that actively engaged themselves in manufacturing projects and trading
Lenders provide MSME loans to the entities mentioned above if they meet the following credentials:
- Credit score should be at least 750
- The business must be registered at least 1 year from the date of applying for a loan
- The company’s repayment history must be spotless
- There must not be repayment default in the past
- Minimum business turnover has to be Rs. 12 Lakhs, though this factor varies from one lender to another
What Are the Features of MSME Loans?
You must know the features whether you are planning for an MSME loan to gather working capital or buy stock, arrange for staff training, pay off outstanding rent, etc. Please refer to the table below for more detailed information:
| MSME Loan Interest Rate | 8.30% onwards |
| Loan Amount | For collateral-free loans, the maximum approvable amount can be Rs. 2 Crores. However, there is no minimum limit. |
| Repayment Period | Varies as per business type, typically ranges between 12 months to 5 years |
| Processing Fees | 2% of the sanctioned loan, excluding GST |
| Bounce Charges | Can be up to Rs. 3000 (including all sorts of taxes) |
| Document Processing Fees | Rs. 1449 + taxes |
| Subsidy | Selected lenders provide subsidy |
| Part-Payment Charges | 4% of the outstanding borrowed sum |
| Foreclosure Fees | 5% of the borrowed sum |
| Outstation Collection Charges | Rs. 65 in addition to other charges (if levied by the repayment intermediary) |
What Are the MSME Loan Interest Rates Offered by Top Indian Banks in 2022?
The table portrays the annual interest rates set by India’s leading MSME lenders in 2022. These rates have been finalised by availing discretion from the RBI and are subject to changes in the upcoming fiscal year.
| Financial Institutes | Interest Rate |
|---|---|
| SBI | 8.30% onwards (applicable for SME loans) |
| HDFC Bank | 16% onwards |
| Axis Bank | 15% onwards |
| ICICI Bank | 18% onwards |
| Kotak Mahindra Bank | 15% onwards |
| Fullerton India | 17% onwards |
| FlexiLoans | 12% onwards |
| IIFL Finance | 18% onwards |
| Hero Fincorp | 18% onwards |
| Lendingkart Finance | 15% onwards |
| ZipLoan | 18% onwards |
| Indifi Finance | 18% onwards |
| RBL Bank | 19% onwards |
| SMEcorner | 20% onwards |
| Tata Capital Finance | 18% onwards |
| NeoGrowth Finance | 18% onwards |
| HDB Financial Services Ltd. | 22% onwards |
| IDFC First Bank | 20% onwards |
| PNB Business Loan | Interest rate fluctuates as per your current business phase |
| Bank of Baroda | Interest rate fluctuates as per your current business phase |
How to use an MSME Loan EMI Calculator?
EMIs are monthly instalments that make loan repayment affordable to borrowers by evenly breaking the outstanding balance into small amounts. Lenders set this EMI considering both the principal borrowed and the interest levied.
While going for MSME loans, you can have flexible repayment, where the tenure ranges between 12 months and 5 years. To keep track of your repayment process, you can calculate the EMI using online MSME Loan EMI calculator available on websites of leading financial institutes. Then, you have to specify the interest rate set by the lender, agreed upon loan tenure, and principal borrowed.
Manually, if you want to calculate the EMI, you can implement the following formula to find the result:
EMI = P x r x (1+r)^n / [ (1+r)^n – 1
In this formula, P stands for principal or borrowed sum
‘r’ signifies interest rate while ‘n’ stands for the number of years.
A bank sets MSME loan interest rate as per the guidelines published by RBI. If you intend to gain more knowledge on MSME loans, you may visit the lender’s official website or an online marketplace listing multiple lending institutions and their products.
