Get the Tata Capital App to apply for Loans & manage your account. Download Now


Equipment Finance

Avail Digital Equipment Loans
up to Rs. 1 Crore

  • Attractive ROIs
  • Customizable Loan tenure

Equipment Leasing

Avail Leasing solutions
for all asset classes

  • Up to 100% financing
  • No additional collateral required

New Commercial Vehicle Financing

  • First time user
  • Retail and strategic Clients

Used Commercial Vehicle finance

  • Repurchase
  • Refinance
  • Top up
  • Balance Transfer

Tata Capital > Blog > Loan for Business > Did You Know These Things about the MSME Sector in India?

Loan for Business

Did You Know These Things about the MSME Sector in India?

Did You Know These Things about the MSME Sector in India?

India has a large 7.9 million registered Micro, Small and Medium Enterprises (MSMEs) base, making it one of the fastest growing in the world. Over 120 million employment is created by the MSME sector in India, which accounts for 33% of the country's GDP and creates wealth at the grassroots level by supporting jobs throughout industries and regions.

Know More

Here are five interesting facts about the MSME sector in India.

#1 The MSME sector in India employs approximately 40% of the total workforce numbering to about six crore employees.

#2 Such businesses contribute roughly 30% of total exports and 45% of domestic manufacturing.

#3 Almost 80% of the Indian industrial outputs are manufactured by the MSMEs that produce over 8,000 products.

#4 Approximately 55.3% of the MSMEs are located in Indian rural areas and 95% of its output is domestically consumed.

#5 Over 32% of the MSMEs have been in business for more than two decades and about 1.22% of units have been around for over five decades.

While the MSME sector in India is crucial and contributes about 33% to the total Gross Domestic Product (GDP), in the last couple of years, this sector is faced several challenges. One of the biggest hurdles faced by small and medium enterprises (SMEs) is the lack of capital.

Capital is the lifeline of any business and is required for the smooth functioning of daily operations. The financial institutions understand this need of capital and offer small business loans to help MSMEs and SMEs to grow their operations.

Understanding an MSME loan

Such loans are offered to entrepreneurs to commence a new business or to expand their current operations. It would involve buying machinery, equipment, or raw materials, taking care of working capital needs, investing in fixed assets, paying rent, paying salaries, and taking care of other daily or monthly costs. It would also involve managing cash flows and making any other financial arrangements necessary for operational needs. Micro enterprises including small production units and service providers may apply for an MSME loan.

Eligibility criteria

Any entrepreneur who is aged between 25 years and 65 years is eligible for the loan. Other criteria include:

#1 The business must be stable and growing

#2 Should be profitable for at least three previous years

#3 Must file income tax returns

The business loan amount available ranges from a minimum of INR 3 lakh to a maximum of INR 50 lakh. It is important that the borrowers provide the lenders with the capability to repay the loan in a timely manner. Lenders offer such loans for a period of one year and three years.

Type of business that may apply for the loan

#1 Trusts

#2 Sole proprietors

#3 Societies

#4 Partners of a partnership

#5 Private limited companies

Documents needed to apply for the MSME loans

#1 Income documents

#2 Repayment capacity proof

#3 Ownership documents

Features of MSME loans


The rate of interest on an MSME or an SME loan is affordable and ranges between 18% and 24%. It primarily depends on the profile of the entrepreneurs and the business.

Flexible tenure

Many financial institutions in India have stepped forward to support the MSME sector in India. When it comes to MSMEs sector in India, they provide loans with flexible terms. MSME loans are available from lenders for terms of one year to 36 months (three years). However, some lenders work closely with you to create an MSME loan that fits your budget

Special benefits

Several lenders offer special benefits to women entrepreneurs who meet the eligibility criteria.

Easily application process

Why wait in long queues at the bank when you apply for an MSME loan online? With everything being digitised, you can easily apply for an MSME  loan online and can easily submit your documents. You may save time and avoid getting bogged down in tedious paperwork offline by submitting your application online.


Unlike home or auto loans, these are available without collateral. This ensures personal assets are not at a risk in case of default or delay. Additionally, lenders offer such facilities without guarantors. MSMEs and SMEs are crucial for the growth of the Indian economy. Financial institutions understand the importance of this sector and offer credit facilities to help them seek funds.