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Know about what the latest MSME loan interest rates are and apply now!
You can get an attractive interest rate for MSME loans starting from 14% p.a.. Here is an overview of rates set by some leading financial institutions that offer business loans to MSMEs on Bajaj Markets:
| Available Offerings | Starting Interest Rate (p.a.) | Processing Fees | Foreclosure Charges |
|---|---|---|---|
29.5% p.a. |
Up to 2% of the loan amount |
As per lender policy |
|
14% p.a. |
Up to 4.72% (inclusive of taxes) |
As per lender policy |
|
22% p.a. |
Up to 4.72% (inclusive of taxes) |
5% of the outstanding principal amount |
|
18% p.a. (reducing) |
Up to 2.5% of the loan amount |
As per lender policy |
|
22% p.a. |
Up to 3% + GST |
As per lender policy |
|
18% p.a. |
3% to 4.25% of the loan amount |
As per lender policy |
|
19.2% p.a. |
Up to 3% + GST |
NIL |
|
20.5% p.a. |
1% - 6% |
Up to 5% |
|
22% p.a. |
3% to 4% + GST |
Up to 4% + GST |
|
16% p.a. |
Up to 3% of the loan amount |
₹1100 |
|
15.5% p.a. |
Up to 2% + GST |
10% + GST (Within 6 months) 5% + GST (After 6 months) |
*Disclaimer: The mentioned rates are subject to change at the lender's discretion.
Identifying the right MSME business loan depends on understanding how lenders set their rates. Here are the key factors that influence the interest rates of MSME Loans:
Credit Score and Financial History
Your creditworthiness is a primary factor in determining the interest rate offered by banks or NBFCs. A high credit score and a clean repayment history demonstrate financial discipline, helping you secure lower interest rates.
Lenders assess the risk profile of your specific industry before deciding on the final loan terms. Businesses in stable sectors with consistent demand often qualify for more competitive rates compared to those in volatile markets.
The total amount you borrow and the time you take to repay it directly impact your interest cost. While longer tenures may offer lower monthly EMIs, they might carry different interest structures depending on the lender’s policy.
Established businesses with a long-standing presence and proven profitability are viewed as lower-risk borrowers. Companies with a solid track record and automated operations often negotiate better rates than newly formed startups.
Opting for an unsecured business loan might result in higher rates due to the lack of security for the lender. Conversely, leveraging government schemes like CGTMSE can help you access funding with different risk-based pricing.
Understanding what is MSME Loan interest rate and calculating it, helps you plan your business finances and manage monthly cash flow effectively. Most lenders use the Reducing Balance method, where interest is calculated on the remaining principal amount after every EMI payment, rather than the initial loan amount.
To calculate your monthly interest, you can use the standard EMI formula:
EMI = [P x R x (1+R)^N] / [(1+R)^N-1]
P: Principal loan amount.
R: Monthly interest rate (Annual rate divided by 12).
N: Number of monthly instalments (Tenure).
To better understand how the interest rate on MSME loans affects your repayment, here is a worked example. It displays use-cases across different loan amounts up to ₹80 Lakhs and tenures up to 96 months at an assumed rate of 14% p.a.:
| Particulars | Details |
|---|---|
Loan Amount |
₹80,00,000 |
Interest Rate |
14% p.a. |
Tenure |
8 years (96 months) |
Monthly EMI |
₹1,39,715 |
Total Interest Payable |
₹54,12,657 |
Total Repayment |
₹1,34,12,657 |
Government-backed MSME loan schemes are designed to improve credit access for small businesses by offering favourable interest rates, risk-sharing mechanisms, and financial support. Below is an overview of some widely used MSME schemes and their typical interest structures:
| Scheme | Key Objective | Interest Rate (p.a.) |
|---|---|---|
|
Provides funding to micro and small businesses under Shishu, Kishore, and Tarun categories |
No fixed interest rate. Banks/RRBs/NBFCs lend at regulated caps, not a universal scheme rate. |
CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises) |
Offers collateral-free loans with credit guarantee support |
No fixed interest rate. It is a guarantee scheme for loans up to ₹10 Lakhs and rises by slab for loans up to ₹10 Crore |
|
Supports new business ventures with subsidies on project cost |
No fixed interest rate. Decided by the individual bank. |
|
Provides direct and indirect financing to MSMEs |
Interest rates typically range between 5.00% and 10.50% p.a., generally linked to the bank's MCLR |
Securing a MSME loan at a lower interest rate can significantly reduce your overall borrowing cost and improve cash flow. Here are some practical tips to help you qualify for more a competitive rate of interest on MSME Loan:
A strong credit score reflects financial discipline and reduces lender risk, helping you access lower interest rates.
Timely repayment of past loans and credit obligations improves your credibility and strengthens your loan profile.
Providing collateral can reduce the lender’s risk, often resulting in more favourable interest rate offers compared to unsecured loans.
Consistent revenue, profitability, and healthy cash flow reassure lenders about your repayment ability.
Borrowing within your repayment capacity and selecting a suitable tenure can help you negotiate better rates.
Reviewing offers across banks and NBFCs helps you identify the most competitive interest rate for your business needs.
The ₹15 Lakh subsidy for MSMEs refers to financial assistance offered under schemes like PMEGP or CLCSS. It is not a direct cash grant but a capital subsidy or margin support, reducing the loan burden. The subsidy depends on eligibility, project cost, location, and the scheme you apply under.
Rates of interest on MSME loans can be either fixed or variable (floating). A fixed rate remains the same throughout your tenure, ensuring steady EMIs. Floating rates are linked to external benchmarks like the Repo-Linked Lending Rate (RLLR) and change based on RBI policy shifts.
The interest rate directly determines your borrowing cost. A higher interest rate increases your Equated Monthly Instalment (EMI) and the total repayment amount. Conversely, a lower rate reduces your monthly burden, improving your business cash flow and making daily operations more manageable.
Yes, lenders vary rates based on your industry's risk profile. Service-based businesses, like IT consultancies, often get lower rates due to lower capital risks. Manufacturing units may face slightly higher rates because they require larger investments in machinery and carry different operational risks.
MSME business loan interest rates vary across lenders and borrower profiles. Typically, they start from around 7% p.a. and can range up to 18% or more, depending on creditworthiness, loan amount, tenure, and business risk. Comparing offers across lenders helps secure more competitive and suitable rates.
Interest rates under government MSME schemes are usually linked to lender benchmarks and are not fixed by the government. They generally start from around 7% p.a. and may go up to 12%–14% or higher, depending on the scheme, subsidy benefits, and borrower profile.
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