Starting a new business in India requires strong financial planning and adequate capital. For startups and first-time entrepreneurs, arranging funds can be one of the biggest challenges. Fortunately, MSME loans for startups provide structured financial support through banks, NBFCs, and government-backed schemes.

In 2026, the Indian government continues to promote entrepreneurship through various MSME loan schemes that offer lower interest rates, collateral-free financing, and credit guarantee support.

What Are MSME Loans for Startups?

MSME loans are financial products designed specifically for micro, small, and medium enterprises. Startups and newly established businesses can apply for these loans to fund:

• Business setup costs
  
• Machinery and equipment purchase
  
• Working capital requirements
  
• Office or shop rent
  
• Marketing and branding
  
• Technology upgrades
  

These loans may be secured or collateral-free depending on the scheme and lender policy.

Why MSME Loans Are Important for New Businesses

Startups often struggle with limited savings and lack of credit history. MSME loan schemes help bridge this funding gap by offering:

• Affordable interest rates
  
• Collateral-free loan options
  
• Flexible repayment tenure
  
• Government-backed credit guarantee
  
• Easy digital application process
  

Such support reduces financial stress and allows entrepreneurs to focus on business growth.

Types of MSME Loans Available for Startups

Understanding different loan options helps you choose the right one.

1. Mudra Loan (PMMY)

Mudra loans are ideal for micro and small startups.

Loan categories:

• Shishu – Up to ₹50,000
  
• Kishor – ₹50,000 to ₹5 lakh
  
• Tarun – ₹5 lakh to ₹10 lakh
  

Key benefit: No collateral required.

Suitable for small traders, service providers, and local businesses.

2. CGTMSE-Backed MSME Loans

Under the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), banks provide collateral-free loans with government guarantee coverage.

The loan amount can go up to ₹2 crore depending on lender policy.

This scheme is highly beneficial for startups without assets to pledge.

3. Stand-Up India Scheme

Designed to support women and SC/ST entrepreneurs.

Loan range:
₹10 lakh to ₹1 crore

Purpose:
Greenfield enterprises in manufacturing, services, or trading sectors.

This scheme encourages inclusive entrepreneurship.

4. PMEGP (Prime Minister’s Employment Generation Programme)

PMEGP supports new manufacturing and service units.

Loan amount:

• Up to ₹25 lakh for manufacturing
  
• Up to ₹10 lakh for service businesses
  

Subsidy benefit:
15% to 35% capital subsidy depending on category.

5. SIDBI Startup Loans

Small Industries Development Bank of India (SIDBI) offers specialized loan products for MSMEs and startups.

Benefits:

• Longer repayment tenure
  
• Soft loan support
  
• Expansion funding
  

Eligibility Criteria for MSME Startup Loans in 2026

Although eligibility varies across schemes, general criteria include:

Basic Requirements

• Applicant must be 18–65 years old
  
• Indian citizen
  
• Valid Udyam Registration
  
• Business entity registered (Proprietorship, Partnership, LLP, Pvt Ltd)
  

Financial Requirements

• Acceptable credit score (preferably 700+)
  
• Basic turnover record (for existing businesses)
  
• Clean bank transaction history
  

Startups without operational history may require a strong project report and the promoter’s financial credibility.

Documents Required for MSME Loans

Keep the following documents ready:

Identity & Address Proof

• Aadhaar card
  
• PAN card
  

Business Documents

• Udyam Registration Certificate
  
• GST registration (if applicable)
  
• Business incorporation certificate
  

Financial Documents

• Bank statements (6–12 months)
  
• Income Tax Returns (if available)
  
• Project report or business plan
  

Clear documentation speeds up approval.

Interest Rates and Repayment Terms

Interest rates for MSME startup loans in 2026 typically range between 8% and 14%, depending on:

• Credit score
  
• Loan amount
  
• Scheme type
  
• Lender policy
  

Repayment tenure usually ranges from 3 to 7 years. Some schemes may offer a moratorium period for new businesses.

How to Apply for MSME Loan as a Startup

Follow these steps:

Step 1: Choose Suitable Scheme

Identify the scheme that matches your funding needs.

Step 2: Prepare Business Plan

Clearly outline the business model, revenue projections, and fund usage.

Step 3: Check Eligibility Online

Many banks offer online eligibility calculators.

Step 4: Submit Application

Apply through the bank website or government portal.

Step 5: Verification and Approval

The bank evaluates credit score, financial stability, and business viability.

Step 6: Loan Disbursement

Upon approval, funds are transferred to your business account.

Benefits of MSME Loans for Startups

• Enables business launch without exhausting personal savings
  
• Supports expansion and scalability
  
• Builds credit profile for future borrowing
  
• Provides structured repayment plan
  
• Encourages entrepreneurship and job creation
  

With proper planning, MSME loans become a growth catalyst.

Conclusion

MSME loans for startups and new businesses in India provide structured and affordable financing options. With government-backed schemes like Mudra, PMEGP, Stand-Up India, and CGTMSE support, new entrepreneurs can access funding without heavy collateral requirements.

In 2026, digital loan processing, improved compliance systems, and financial inclusion initiatives have made it easier for startups to secure funding. However, eligibility depends on credit discipline, proper documentation, and realistic financial planning. By choosing the right MSME loan scheme and maintaining financial transparency, startups can build a strong foundation and accelerate business growth.You can contact us at +91 9001329001 for any query or if you require our services to prepare a project report or a bank loan.

Frequently Asked Questions 

1. Can a startup get an MSME loan without business history?

Yes, startups can apply for MSME loans even without a a long business history. However, approval depends on the promoter’s credit score, the business plan’s strength, and the selected government scheme. A detailed project report increases approval chances.

2. What is the maximum MSME loan amount for new businesses?

Loan amount depends on scheme and eligibility. Mudra loans offer up to ₹10 lakh, PMEGP supports up to ₹25 lakh for manufacturing, and CGTMSE-backed loans may go up to ₹2 crore depending on bank policy.

3. Is collateral mandatory for MSME startup loans?

Not always. Many schemes like Mudra and CGTMSE offer collateral-free loans. However, larger loan amounts may require security based on lender policy.

4. How long does MSME loan approval take for startups?

The approval timeline generally ranges from 7 to 15 working days depending on documentation, scheme type, and lender process.

5. What credit score is required for a startup loan?

Most lenders prefer a credit score of 700 or above. Lower scores may still qualify under certain schemes but may attract higher interest rates.