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MSME loans provide funds to meet various business needs, such as enhancing cash flow, expanding business, managing working capital, covering business expenditure and much more.
There is no minimum loan limit to borrow, and the maximum loan amount can go up to Rs. 2 crore. However, depending on the applicant’s credit profile and business’s needs and requirements, the loan amount may exceed.
You can check, compare and apply from several types of business loans on Paisabazaar at an interest rate starting from 14.99% p.a. that suits your business requirements. Let’s further discuss various types, interest rates, eligibility criteria and documents required for MSME loans.
Types of MSME Loans in India
The types of MSME loans in India can be largely categorized based on their nature, purpose, features, and government schemes providing back up to them. MSME loans can be both secured and unsecured, depending upon the borrower’s capacity and bank’s requirements. Find below the major loan schemes for the support and development of MSMEs in India.
1. Term Loans
Majorly used for long-term investments, including expanding facilities, capital expenditure, purchasing goods & raw materials, etc.
2. Working Capital Loans
Used to manage day-to-day business operations, such as paying rent/salaries, utility payments, inventory purchases, training costs, etc. Additional loan types that are categorized under Working Capital Loans include Cash Credit, Letter of Credit, Bill/Invoice Discounting, Bank Guarantee, Trade Credit, Merchant Cash Advance/POS Loans, etc.
3. Overdraft Facility
Availed as a short-term credit facility to manage urgent expenses or temporary cash flow needs. It is a credit line, which allows borrowers to withdraw funds from the total credit limit to meet urgent cash requirements.
4. Machinery/Equipment Loans
Specifically designed to buy or upgrade machinery/equipment, enabling MSMEs to enhance production capacity and operational efficiency.