"MSME loan scheme" is a perennial top search because the schemes are real, the money is cheap, and the process is confusing. This guide covers the five that matter for a shop, service business or small manufacturer, with 2026 limits.
Quick comparison
| Scheme | Amount | Collateral | Typical rate | Who |
|---|---|---|---|---|
| PM Mudra (PMMY) | Shishu ≤ ₹50k · Kishore ₹50k–5L · Tarun ₹5–10L · Tarun Plus ₹10–20L | None | 9–12% (bank/NBFC) | Non-farm micro units, traders, services |
| CGTMSE-covered loans | Up to ₹5 crore (₹10 cr enhanced) | None (guarantee fee 0.37–1.35%) | Bank MSME rate ~9–12% | Udyam-registered manufacturing & services |
| PMEGP | Manufacturing ₹50L · Services ₹20L, with 15–35% subsidy | None up to ₹10L | Bank rate | New units; 8th pass for > ₹10L; one per family |
| Stand-Up India | ₹10L – ₹1 crore | CGTMSE cover | Bank rate | SC/ST or woman entrepreneur, greenfield |
| PM Vishwakarma | ₹1L then ₹2L | None | 5% (subsidised) | 18 traditional trades (carpenter, tailor, goldsmith, potter…) |
| PM SVANidhi | ₹10k → ₹20k → ₹50k | None | 7% subvention on timely repayment | Street vendors |
| Udyam Assist / TReDS | Invoice discounting | Receivable itself | 8–11% | MSEs supplying to large buyers |
Mudra: the default first loan
Apply at any bank, small finance bank or NBFC, or via udyamimitra.in. Documents: identity/address proof, Udyam certificate, business plan/quotation for machinery, six months' bank statements, GST returns if registered. Shishu loans are frequently sanctioned within a week; Tarun Plus (the ₹20 lakh tier added in 2024) requires a clean repayment record on an earlier Mudra loan.
Rate is set by the lender; PSU banks price near MCLR + 1–2%. Processing fee is waived on Shishu. Repayment 3–7 years.
CGTMSE: collateral-free for real businesses
The Credit Guarantee Fund covers the bank against default, so the bank does not ask for property. Coverage up to ₹5 crore (75–85%); the "enhanced" scheme covers up to ₹10 crore for Udyam-registered units. You pay a small annual guarantee fee (0.37% for loans up to ₹10 lakh, rising with size). Ask specifically: "Can this be covered under CGTMSE?" — branch staff sometimes default to asking for collateral.
PMEGP: the one with a subsidy
Implemented by KVIC/DICs for new units. Margin money (subsidy) of 15% (urban) / 25% (rural) for general category, 25%/35% for special categories, on project cost. Apply on kviconline.gov.in with a project report; interview by the district committee; bank sanctions the loan; subsidy sits with the bank for 3 years and is adjusted if you run the unit. Manufacturing projects up to ₹50 lakh, services up to ₹20 lakh. A second loan for expansion is available for units that repaid the first.
PM Vishwakarma: 5% loans for artisans
For 18 trades — carpenters, blacksmiths, goldsmiths, potters, cobblers, tailors, masons, barbers, washermen, and more. Register via CSC; get training (with stipend), a ₹15,000 toolkit incentive, then ₹1 lakh collateral-free at 5% (18-month tenure), and ₹2 lakh after repayment. Also digital-transaction incentives.
What makes applications succeed
- Udyam certificate — mandatory for CGTMSE and priority-sector tagging; free.
- Six months of clean bank statements with business inflows — route UPI collections through the business account.
- GST returns (if registered) that match bank credits.
- A one-page plan: what you'll buy, what it earns, how you'll repay. Use the profit margin calculator for unit economics and the EMI calculator to show the repayment fits cash flow.
- Quotations for machinery/stock — a purchase order or supplier quotation shows the money's use.
- Credit score above 700 (CIBIL) — or, for a first loan, no defaults on personal borrowings.
Alternatives when banks say no
- NBFC digital loans (Lendingkart, Flexiloans, bank-backed fintechs): faster, 14–24%, based on GST/bank data.
- Invoice discounting on TReDS for receivables from large or government buyers — often cheaper than a term loan, and pairs with the 45-day payment rule.
- Supplier credit — negotiate 30-day terms; it's interest-free working capital.
- Avoid app-based "instant" personal loans at 30%+ for business needs.
FAQ
Can I get a Mudra loan without collateral?
Yes — all Mudra loans are collateral-free by design; banks may ask for a personal guarantee.
Is there a subsidy on MSME loans?
PMEGP gives 15–35% margin money; interest subvention exists in specific state schemes and for PM SVANidhi/Vishwakarma. Plain Mudra and CGTMSE loans have no subsidy but no collateral.
How long does sanction take?
Shishu Mudra: 3–10 days. CGTMSE term loans: 2–4 weeks. PMEGP: 2–3 months including training and committee approval.
Can a trader apply for CGTMSE?
Retail and wholesale trade were brought under CGTMSE coverage in 2022–23 for Udyam-registered traders; check the current guidelines with your bank.