A Guide on the Benefits of MSME Loans

MSMEs, or Micro, Small, and Medium Enterprises have emerged as a major pillar of the Indian economy's foundation.

MSMEs empower citizens to go out on their own and, in turn, give back to society by creating new jobs and diversifying an area's gross domestic product (GDP).

They have also gradually and steadily revived the artisan class in India's far reaches by providing employment, loans, and other services to the said class.

Furthermore, they consistently support technological advancement, infrastructure development, and the modernization of the country and our society as a whole.

What Are The Benefits Of MSME loans?

To assist MSMEs, the Indian government introduced the MSME (Amendment) Bill of 2018 and re-emphasized the MSME Act of 2006

Let us look at some of the benefits of an MSME loan -

1. Easy Access to Capital

MSME loans can get easily sanctioned and do not require excessive paperwork. One can also apply for a loan digitally without having to visit the bank at all. This gives MSMEs easy access to capital which can then be invested in the business.

2. Collateral Free Loans

Collateral free loans do not require any guarantor or collateral to be pledged. This works in the favor of MSMEs that do not have high value assets to pledge.

3. Affordable Interest Rates

The government of India has many schemes with subsidized interest rates to encourage MSMEs. This helps MSMEs to get loans at affordable interest rates, reducing the financial burden on them.

4. Short Term Loans

Loans can end up being a financial burden for a businessman if the tenure is long. But MSME loans are mostly short term loans which are taken to fulfill the immediate capital requirements of a business.

Benefits of MSME Loans

Learn More About: MSME / SME Loans

MSME Certificate Benefits

If you want to know about MSME certificate benefits or MSME registration benefits, there are many. Take a look at the benefits of registering your business as an MSME

1. Tax Benefits

Registering as an MSME can help with Direct Tax Exemption in the first year of operation.There are numerous other benefits that can help save money and also relieve you of the need to maintain comprehensive account books. 

2. Easy Subsidized Loans

Businesses that have registered as MSMEs often get subsidized loans from the government that have lower interest rates. 
Priority lending is also maintained for this sector, which means they can get loans much more easily.

3. Patent Registration Subsidy

As per current rules, enterprises registered as MSMEs are eligible for a 50% subsidy on patent registration fees. This acts as a motivation for MSMEs to develop novel ideas and technology.

4. Marketing and Promotion Assistance

The Government of India often organizes trade-related events, exhibitions, etc. which helps in the marketing and promotion of the participating MSMEs. 
Participating in these international craft fairs and exchange programs helps the MSMEs to build commercial relationships. 

5. Technology Upgradation Support

If an MSME upgrades to clean technology, the government reimburses project costs. Often licensing costs for products are also subsidized.

6. Concession on Electricity Bills

All enterprises that are registered as an MSME can apply for concessions on their electricity bills. This helps them to focus on improving production without worrying about capital expenses. 

7. Protection Against Delayed Payments

Often buyers make late payments which disrupts the flow of cash for MSMEs. 
The Supreme Court has mandated that any buyer should make the payments on or before the agreed-upon date. 
If they delay payment for more than 45 days, a registered MSME can charge interest on the payment. 

Common Challenges Faced by MSMEs

There are multiple benefits of registering as an MSME, but positives always come with negatives. In case you were searching for msme advantages and disadvantages, here are some common challenges that MSMEs face from time to time -

Financial Issues

Access to timely financing is a major issue for smaller enterprises. Since MSMEs don’t have high value assets to pledge for loans, they are often forced to rely on their own resources. 
Sometimes even lack of knowledge about finances leads them to make bad decisions, which later cause financial difficulties. 

Marketing and Advertising

As there is already a financial crunch to run the day to day operations, spending time, money and effort on customer research and acquisition poses a challenge. 
This leads to a lack of customer understanding, which may in turn affect turnover.

Skilled Labour

Most MSMEs face challenges when it comes to hiring affordable skilled labor. 
Thus most of the activities end up being handled by unskilled labor, who may lack the professionalism to make the enterprise a success.

Technological Changes

There is a lack of awareness, financial backing, and technological knowhow in most MSMEs, which makes them miss out on most of the changing trends.


Competition is an inevitable part of business, but MSMEs often face competition from bigger enterprises. 
With the advent of globalization, bigger enterprises have come closer to consumers often hampering the business of local MSMEs.


MSMEs are a major pillar of the Indian economy. They consistently support technological advancement, infrastructure development, and the modernization of the country and our society as a whole. 

The Government of India supports MSMEs by giving various subsidies and concessions. Thus there are a lot of advantages to registering your business as an MSME. It will eventually help your business grow and also contribute positively in keeping the local artisans or crafts alive.

A Guide on the Benefits of MSME Loans - Related FAQs

The government of India has many schemes and programs for making it easier for MSMEs to get loans. They can get faster loans, which can often be processed online without much hassle.

MSME loans can be applied with interest rates beginning from 7.65% to 15%.

The documents that are required to apply for an MSME loan are very similar to that of an business loan -

  • The MSME application form duly filled and signed by all the applicant(s)
  • Passport size photographs of all the applicant(s)
  • Identity proof and age proof of all the applicant(s)
  • Residence address proof of all the applicant(s)
  • Current Business address proof 
  • A business plan or road map might be necessary 
  • Income proof of the business 
  • Registration proof of the MSME
  • MSME Certificate also known as Udyam Registration Certificate

You can approach any bank branch or even the local municipal office for knowledge on the current schemes of MSME loans. Post that, your loan will be handled by a bank branch near your home/office address.

Here are some examples of the various government schemes operational for MSME - 

1. MUDRA loans, for micro and medium sized businesses

2. MSME loans in 59 minutes

3. Credit Guarantee Scheme for micro and small enterprises

MSME Loans Related Interlink

Was this information useful?

300 characters allowed (alphanumeric and special characters such as comma, full stop, @, ", &)

Thank you. Your feedback is important to us.


Apply for personal loan

Green Tick Success

Thank you for your interest!

We will reach out to you shortly