What are the common repayment terms and interest rates for MSME loans?

Repayment terms and interest rates for Micro, Small, and Medium Enterprises (MSME) loans typically vary depending on the loan provider, loan type, and applicant profile. However, these are a few general things you may want to remember before applying for the loan:

• Loan Tenure: MSME loans are often available for a few years, with the duration aligned to the purpose of the loan and business needs. Working capital requirements may warrant shorter tenures, while longer timeframes help match instalments to returns on capital investments.
• Repayment Frequency: Monthly equated instalments are commonly structured, but some loan providers can offer adjustable quarterly or bi-annual repayment options based on seasonal or intermittent cash flows.
• Prepayment Policies: Lenders usually permit prepaying loan balances, but prepayment fees may apply in certain cases.
• Grace Period: A grace period may be granted for new loans to provide businesses time to stabilise operations before instalments commence.
• Interest Rates: Prevailing MSME loan rates start from 8.5% p.a., depending on the lending institution, loan amount, applicant’s risk profile, and general economic conditions. A choice of fixed or floating rates is available to lock in consistent obligations or benefit from declines in market benchmark rates.