Top 5 Banks for MSME Business Loans

Created on 16 Jun 2022

Wraps up in 5 Min

Read by 7.1k people

Updated on 13 May 2023

Just a humble advice, it would be great if you start your small business with the savings you have rather than seeking for loans. 

Starting a new business is always a scary task and a difficult one too. An entrepreneur setting his foot in the market for the first time must overcome several obstacles, including finding a way to fund their business. 

Even if the business has started, an entrepreneur has to find a way to fund the future enhancements of his business. He has to ensure that his business's growth doesn't stop just because of monetary causes. Just as Peter Drucker said, "The best way to predict the future is to create it."

And the MSME loans help the entrepreneurs around the country fund their businesses and help them grow. So, if an individual wants to make enhancements in his business, he should know about the MSME loan scheme and the different benefits it offers. So let's take a look at MSME loans and the different schemes offered by the banks.

What is an MSME Loan?

MSME loans or Micro, Small, and Medium Enterprises loans are unsecured loans given to the entrepreneurs looking to expand their business by financial institutions. 

The purposes for which startup owners can take MSME loans include purchasing raw materials or equipment, paying rent, managing cash flow, meeting the capital requirements for work, and purchasing machinery.

Every bank offers MSME business loans at different interest rates for flexible tenures. The entrepreneur should see which bank fulfils their requirement best and take a loan from that bank only.

What are the Benefits of an MSME Loan?

MSME loans can be beneficial to businesses in several ways. Some of them:

  • Accessibility: Taking an MSME loan is not tedious. It requires minimal documentation, does not take much time to disburse the loan amount, and has a fast processing time. For example, an individual can take loan approval in as low as 24 hrs of time.

  • Low-interest rate: In the MSME loan, it is taken care that less amount of money goes into the repayment of the loan, and the majority of the money stays with the businessman to fulfil various business needs.

  • No collateral requirements: Probably the best perk of the MSME loan scheme is that the entrepreneur is not compelled to keep any of his assets as collateral. This is because banks consider startups as 'asset light' that cannot afford to keep anything as collateral.

Writer’s Opinion:
I think an MSME loan is a great opportunity for individuals who have creative business ideas but don't have funds to back them up. They can take the loan and start the business they had dreamt of. And it is also beneficial for small business owners looking to expand their business.

Top 5 Banks for MSME Business Loans

Although an entrepreneur has various options as to where they want to take the loan, they should make sure that they know all about the MSME loan interest rate and other features offered by different banks before settling on one.

The best 5 banks for MSME business loans are:

1. State Bank of India

State Bank of India provides MSME loans to small business owners in various fields and has separate categories for every kind of necessity. Entrepreneurs can choose the loan according to their needs.

Some of the loans offered by the State Bank of India for small businesses are; SBI Asset-Backed Loan, SBI Lease Rental Discounting, SME eBiz Loan, Simplified Small Business loan, SBI Loan to Business Correspondents, and SBI Export Packing Credit.

Anyone can easily fill out the MSME loan application by going to the official website of SBI or visiting its nearest branch. However, it is important to make sure that the individual has all the important documents. Different kinds of firms require different kinds of documents. So make sure to check that out.

Do you know? To open a bank account in the SBI’s Kohinoor branch, Hyderabad, the minimum account balance should be at least Rs. 1 crore. An individual needs to get an invitation from the SBI first to open their account in this branch, even if they have the money.

2. Canara Bank

Interest rates for the MSME business loan provided by Canara bank depend on the lender and the amount loaned out. Some of the schemes provided by the bank for small business owners are; Canara Chikitsa, Canara Jeevan Rekha, Canara MSME Gold Loan, Canara CAN BEML, Mudra Canara Atithi, Canara MSME Cap, Canara GST, MSE Vijeta, Laghu Udyami Credit Card, Doctor’s Choice, Canara Caravan, Canara Contractors Scheme, Canara Smart Professional, Canara Udyog, Canara Vyapar, Canara MSME Expo, and Pradhan Mantri Mudra Yojana.

MSME loan application method includes a physical visit to the branch and an online application using the official website. Check out the required documents before starting the process.

3. Union Bank of India

Interest rates are at the bank's discretion and have a set of eligibility criteria that the business should fulfil to apply for the loan. Some of the loan schemes provided by this bank are; Union Mudra, Union GST Input Credit Card, Union TReDS, Union Start-Up, Union Trade Plus, Union Liqui Property, Union Turnover Plus, and Union High Pride.

Each scheme has a different loan limit, interest rate, and eligibility criteria. Entrepreneurs can choose the scheme that fits their business best.

4. UCO Bank 

UCO Bank offers loans up to Rs. 200 lakhs completely collateral-free. Different MSME loan schemes offered by the bank take care of the funding of small and micro-businesses. Some of them are; Scheme For Financing Two Wheelers Under Mudra, Pradhan Mantri MUDRA Yojna, E-Rickshaw Under Mudra Scheme, Swaraojgar Credit Card, and STANDUP India.

5. Punjab National Bank

This bank offers a maximum loan amount of Rs. 10 lakhs and can be requested by prospective or existing MSE borrowers. Various schemes offered by the bank are; PNB Weaver Mudra Scheme, SME Sahayog Scheme, PNB Dealer Suvidha, PNB Artisan Credit Card, PNB Seva, and PNB Nirmata.

Wrapping up

Various banks offer MSME loans to help the new entrepreneurs looking to set their foot in the market. The scheme aids small business owners for multiple purposes, including purchasing materials and machines. 

Every bank has a different MSME scheme to cover all these purposes, and the schemes differ from each other in terms of eligibility criteria, interest rates, loan amount, and collateral requirements. Entrepreneurs looking for funding to expand their business should know all about these different schemes and the maximum loan amount they allow.

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Ayushi Upadhyay

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A Keen Learner. Tiny, brainy, and studious, this quiet one stays in her zone until she pops. And once she does, boy, are her comebacks snappy! There is no financial question that she can't answer through her magical blog-writing. 

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