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Difference Between A business Loan & MSME Loan

By Finserv MARKETS - Sep 9,2019
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Difference Between A business Loan & MSME Loan

MSME loans means Micro, Small and Medium Enterprises. The Micro, Small and Medium Enterprises (MSMEs) have contributed significantly to the growth of our nation’s economy in the last few years. The MSMEs have emerged as the backbone of the Indian economy by generating millions of job opportunities across the country. Thus, the MSME industry has played a pivotal role in solving the problem of unemployment in the country. A large number of youths are interested in entering the MSME industry. This is due to the low investment associated with it. However, it is to be noted that entrepreneurs face several challenges while availing finance to expand their MSME. In order to solve this problem, the MSME loan scheme offers various credit products such as project finance, equipment finance, working capital loan, bill discounting, etc.

A typical business loan differs from an MSME loan. The eligibility criteria of both business loans and MSME business loan may differ from one financial institution to another. Therefore, it is advisable to research the financial institution carefully before applying for either of these loans.

Read more about Msme Loan for New Business vs Startup Loan for New Business

Let’s have a look at some of the important factors that determine the differences between business loans and MSME loans.

Business loan vs MSME loan

Type of Business

Business loans are provided to established businesses to fund their growth and expansion strategies. On the other hand, an MSME loan caters to small scale businesses and startups.

Purpose of the loan

  • The primary objective of the business loan is to help meet objectives such as business growth strategies, expansion, and diversification strategies amongst others.
  • The primary objective of the MSME loan is to meet the business needs such as the purchase of raw material, machinery, managing working capital, marketing, expansion of business operations, etc.

Loan Amount and Tenure

  • The loan amount that can be availed in case of a business loan is much higher as compared to an MSME loan. Moreover, the loan term of business loans is also longer as compared to MSME loans. Bajaj Finserv business loan for MSME on Finserv MARKETS provides loans up to ₹ 15,00,000 and you can get a approval within 3 minutes within attractive business loan interest rates.
  • Therefore, businesses applying for MSME loans are expected to repay the loan amount in shorter duration as compared to flexible tenure options available for conventional business loans.

Interest Rates

The business loan interest rate is comparatively lower than the interest charged for MSME loans.


  • To avail a small business loan, entrepreneurs have to go through a rigid documentation process. Business loan applicants are advised to follow the business loan online procedures.
  • On the other hand, MSME loans are much more flexible and require minimum documentation.

Credit History and Collateral:

  • The credit history of the borrower plays a crucial role while availing a business loan. Financial institutions check the credit score of the borrowers to determine their creditworthiness. A good credit score means that the borrower is financially stable and has a high repayment capacity.
  • Therefore, most lenders provide business loans to applicants who show a good track record in terms of their credit history. Apart from increasing the chances of the business loan approval, a good credit score can also help the borrowers avail a comparatively higher loan amount at a reduced interest rate.
  • On the other hand, the credit score might not play such a crucial role in the case of MSME loans.


  • Business loans are secured loans because of the higher loan amount associated with them. Therefore, while availing a business loan, borrowers are expected to provide their lenders with adequate security in the form of collateral.
  • On the other hand, SME loans are normally collateral-free.

Disbursal time:

  • MSME loans are disbursed instantly within a few days of submission of the required documents.
  • MSME loans have a quick turnaround time as compared to traditional business loans.

While availing a business loan, it is always advisable to compare various loan products offered by different financial institutions. This will help you avail a business loan that best suits your needs. A Bajaj Finserv Business Loan comes with competitive interest rate and other attractive features such as less processing fees, no hidden charges, quick approval, and instant disbursal.

Business Loan Apply Online

You can also calculate your monthly installments with the help of an online business loan EMI calculator. This will help you plan your monthly budget wisely and make timely repayment of your business loan.

You can also get information on benefits of taking a business loan.

Read more on MSME Databank

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Bajaj Finserv Direct Limited ("BFDL") is primarily engaged in distribution of financial products and services through its digital platform (“Bajaj Finserv MARKETS”) and inter alia renders services of customer acquisition, providing preliminary credit support activities, fulfilment services and post-acquisition customer services to Banks, NBFCs, HFCs. BFDL is also a registered Corporate Agent (Composite) under valid IRDAI registration number: CA0551 valid till 10-Apr-2024 for solicitation and servicing of Insurance Products. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522