Micro, Small, and Medium Enterprises (MSMEs) are the backbone of India’s economy, contributing significantly to employment generation, exports, and GDP. To boost this vital sector, the Government of India has launched several MSME loan schemes to provide easy access to finance.MSME Loan Schemes by Government These schemes are designed to support both new and existing enterprises with working capital, equipment financing, and business expansion needs.
In this guide, we’ll walk through the most important MSME loan schemes offered by the Indian government in 2025, including features, eligibility, benefits, and how to apply.
✅ What is an MSME Loan?
An MSME loan is a financial product specifically tailored for Micro, Small, and Medium Enterprises. These loans can be used for:
- Starting a new business
- Purchasing equipment or machinery
- Expanding operations
- Managing cash flow or working capital
- Upgrading technology
🔝 Top Government MSME Loan Schemes in 2025
Here are the most prominent MSME loan schemes by the Government of India:
1. PMEGP – Prime Minister’s Employment Generation Programme
| Feature | Details |
|---|---|
| Type | Credit-linked subsidy |
| Loan Amount | Up to ₹25 lakh (Manufacturing), ₹10 lakh (Service) |
| Subsidy | 15%-35% (varies by location/category) |
| Interest Rate | As per bank norms |
| Tenure | Up to 7 years |
| Collateral | Not required up to ₹10 lakh |
Eligibility:
- Age 18+
- Minimum 8th standard pass for manufacturing units
- New entrepreneurs only (no existing units)
Apply via: kviconline.gov.in
2. Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)
| Feature | Details |
|---|---|
| Purpose | Collateral-free loans |
| Loan Amount | Up to ₹5 crore |
| Guarantee Coverage | 75%-85% (up to 90% for women & NE) |
| Lending Institutions | All scheduled commercial banks |
Benefits:
- Reduces the burden of collateral
- Encourages risk-free lending by banks
3. MUDRA Loans under Pradhan Mantri Mudra Yojana (PMMY)
MUDRA offers loans under 3 categories:
| Category | Loan Amount |
|---|---|
| Shishu | Up to ₹50,000 |
| Kishore | ₹50,001–₹5 lakh |
| Tarun | ₹5 lakh–₹10 lakh |
Features:
- No collateral required
- Subsidized interest rates
- Available through banks, NBFCs, and MFIs
Best For: Small traders, vendors, artisans, startups
Apply via: Your nearest bank or www.mudra.org.in
4. Stand-Up India Scheme
| Feature | Details |
|---|---|
| Loan Amount | ₹10 lakh to ₹1 crore |
| Purpose | Greenfield enterprises in manufacturing, services, agri-allied sectors |
| Target Group | SC/ST and Women entrepreneurs |
| Tenure | Up to 7 years with moratorium |
Collateral: May be required unless covered under CGTMSE
Apply via: www.standupmitra.in
5. SIDBI Make in India Soft Loan Fund for MSMEs (SMILE)
| Feature | Details |
|---|---|
| Loan Type | Soft loan |
| Purpose | New enterprises & expansion |
| Interest Rate | ~8.5% onwards |
| Tenure | Up to 10 years |
| Loan Amount | Custom depending on project size |
Administered By: SIDBI (Small Industries Development Bank of India)
6. Emergency Credit Line Guarantee Scheme (ECLGS)
| Feature | Details |
|---|---|
| Loan Amount | Up to 20-30% of existing credit |
| Interest Rate | Capped at 9.25% (banks), 14% (NBFCs) |
| Tenure | 4 years with 1-year moratorium |
| Guarantee | 100% by government |
Purpose: For MSMEs facing COVID-19 impact or other economic shocks
Still extended in 2025 under modified terms.
🧾 Eligibility Criteria (General)
While each scheme has specific conditions, here are the general eligibility criteria:
- Should qualify as an MSME as per latest classification:
- Micro: Investment < ₹1 crore & turnover < ₹5 crore
- Small: Investment < ₹10 crore & turnover < ₹50 crore
- Medium: Investment < ₹50 crore & turnover < ₹250 crore
- Valid business registration (Udyam Registration)
- PAN, Aadhaar of promoter(s)
- Business plan and financials for higher loan amounts
📝 Documents Required
| Document Type | Examples |
|---|---|
| Identity Proof | PAN, Aadhaar |
| Address Proof | Utility bills, Rent agreement |
| Business Registration | Udyam Certificate, GST Certificate |
| Financials | ITRs, bank statements, balance sheet |
| Project Report/Plan | For new business or expansion funding |
💡 Benefits of Government MSME Loan Schemes
- Collateral-free finance through schemes like MUDRA and CGTMSE
- Low interest rates compared to private loans
- Subsidies and guarantees help reduce business risks
- Encourage first-time entrepreneurs, women, and underrepresented groups
- Promote Make in India, local manufacturing, and innovation
📌 How to Apply for MSME Loans?
- Choose the right scheme for your business type and loan size
- Visit official portals:
- Udyam Portal: https://udyamregistration.gov.in
- PMEGP: https://www.kviconline.gov.in
- MUDRA: https://www.mudra.org.in
- Stand-Up India: https://www.standupmitra.in
- Prepare and submit required documents
- Apply through your bank/NBFC or the scheme’s online portal
📊 Comparison Table of Major MSME Loan Schemes
| Scheme | Loan Amount | Collateral-Free | Target Group | Subsidy/Guarantee |
|---|---|---|---|---|
| PMEGP | ₹10–25 lakh | Yes (up to ₹10L) | New entrepreneurs | Up to 35% subsidy |
| CGTMSE | Up to ₹5 crore | Yes | All MSMEs | Up to 85% guarantee |
| MUDRA | Up to ₹10 lakh | Yes | Small traders & vendors | N/A |
| Stand-Up India | ₹10 lakh–1 crore | Partially | Women/SC/ST | CGTMSE Cover |
| SMILE (SIDBI) | Case-by-case | Depends | Manufacturing MSMEs | Low-interest loan |
📢 Government’s 2025 Push for MSMEs
In Budget 2025, the government announced:
- Additional ₹30,000 crore credit guarantee support
- Digital onboarding of MSMEs for faster loan approvals
- Expansion of Udyam Assist Platform
- Dedicated Women MSME Fund
🧭 Final Thoughts
The Indian government has built a strong ecosystem to support the growth of MSMEs through easy and subsidized credit access. Whether you are starting a new business or expanding an existing one, government MSME loan schemes can give you the financial boost you need — with fewer risks and more confidence.
📌 Quick FAQs
Q1. Are government MSME loans interest-free?
No, but they are offered at concessional interest rates and some come with subsidies.
Q2. Is a CIBIL score required for MSME loans?
Yes, especially for larger amounts. However, schemes like MUDRA or PMEGP may be lenient.
Q3. Can I apply for multiple schemes?
Yes, but not for the same business purpose. Each scheme serves a specific use case.