Micro, small and medium enterprises are the backbone of India's economy — and almost every one of them needs credit at some point: to buy stock before a festive season, to bridge a payment that is 60 days late, to buy a machine or to open a second outlet. This guide walks through how MSME loans work and how to prepare so a lender can say yes faster.
Who counts as an MSME?
Since 1 April 2025, enterprises are classified by investment in plant and machinery (or equipment) and annual turnover:
| Category | Investment up to | Turnover up to |
|---|---|---|
| Micro | ₹2.5 crore | ₹10 crore |
| Small | ₹25 crore | ₹100 crore |
| Medium | ₹125 crore | ₹500 crore |
Registering on the government's free Udyam portal gives you an MSME certificate that many lenders ask for. Read Udyam registration and why lenders ask for it.
Types of business loans
- Term loan — a lump sum repaid in EMIs over a fixed tenure; suited to equipment, expansion or a one-time need.
- Working capital loan — funds the day-to-day cycle of stock, receivables and payables; can be a short-term loan, an overdraft or a cash-credit limit. See working capital vs term loan.
- Machinery or equipment loan — for buying or upgrading machines, often secured by the machine itself. See machinery loans.
- Unsecured business loan — no collateral; the decision rests on your turnover, banking history and credit record.
- Loans for professionals — for doctors, chartered accountants and other practices. See loans for professionals.
What lenders check
- Business vintage — how long the business has run; many lenders want at least one to three years, varying by lender.
- Turnover and profitability — from GST returns, ITR and financial statements.
- Banking behaviour — regular credits, average balance, and whether EMIs or cheques bounced.
- Credit history — the promoter's personal score and, for companies, the business's commercial credit report.
- Existing debt — how much of your cash flow already goes to repayments.
- Industry and location — some lenders limit lending to certain sectors or regions.
The full list is on our business loan eligibility page.
Documents to keep ready
- PAN of the applicant and the business; Aadhaar or other KYC of the promoters
- GST registration and recent returns, where registered
- Udyam certificate, shop licence, partnership deed or incorporation documents
- Last one to two years' ITR and financial statements, if available
- Bank statements of the main business account — usually for 6 to 12 months
With Oxon Fintech, bank statements are shared digitally through the RBI-regulated Account Aggregator framework, so there are no PDFs to collect. See the full business loan documents checklist.
Tips for a stronger application
- Run sales through your bank account. Lenders can only see the cash flow that passes through the bank.
- File GST and ITR on time. Regular filings are the clearest proof of turnover.
- Avoid bounces. Even one bounced EMI or cheque in the last few months weighs heavily.
- Ask for what the business can repay. Work out the EMI first with the business loan EMI calculator.
- Keep the promoter's credit score healthy — see how to improve your CIBIL score.
- Apply once, not everywhere. Multiple enquiries in a short span can work against you.
Government schemes
Government-backed schemes such as the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) and the PM Mudra Yojana support collateral-free lending through participating banks and NBFCs. Eligibility and limits are set by each scheme and lender, so ask your lender which schemes it offers.
Ready to see what your business may qualify for? Apply for a business loan in a few minutes.
This guide is general information, not financial advice. Interest rates, fees, eligibility and other terms are set by each lender and can change; the figures in examples are illustrative only. Oxon Fintech is a loan facilitation platform, not a lender — loans are sanctioned and disbursed by our lending partners.