What are the different types of MSME loans available?

MSME (Micro, Small, and Medium Enterprises) loans are typically designed to help small businesses manage their financial needs. These loans generally cater to various business requirements, ranging from working capital to expansion plans. Below are some common types of MSME loans available:

• Working Capital Loans: These loans generally finance a business's day-to-day operations, such as purchasing raw materials, salaries, inventory, etc.
• Term Loans: These are usually long-term loans taken by MSMEs for business expansion needs, such as adding machinery, equipment, or a manufacturing facility.
• Machinery Loans: As the name suggests, typically used for purchasing machinery and equipment. Tenure is generally set as per the useful life of the asset purchased and can be up to 84 months.
• MSME Composite Loans: Relatively a combination of working capital, term loan and other credit facilities offered together. Eligibility criteria are usually higher, and amounts sanctioned are typically larger against property mortgages.
• Government-Sponsored Loans: Various state and central government agencies back loans for MSMEs usually at subsidised interest rates and relaxed eligibility. Sub-limits for women entrepreneurs, social inclusion are also provided.

Based on their specific financing needs and eligibility, MSMEs can generally choose from varied loan products offered by banks, Non-banking Financial Companies (NBFCs), and government agencies. Loan amount, tenure, interest rate, and collateral requirement differ with each offering and across different financial institutions.