What is The Difference Between Business Loan and MSME Loan?

Borrowers with an established business in the market can avail business loans. In contrast, start-ups and small-scale businesses can apply for MSME loans to meet their essential business requirements. 

However, before availing a loan, individuals need to register their business in the MSME databank. Individuals need to know the differences between MSME loan and business loan to make an informed decision. 

  1. Type and loan purpose

Business loans are offered to the borrowers to expand their business, purchase raw materials, recruiting new staff, launching new products, etc. On the other hand, MSME loans are provided to manage working capital and meet related business requirements.

  1. Eligibility criteria-

Borrowers can avail funds for a business by meeting the following eligibility criteria-

  • Age should be within 24-70 years
  • CIBIL score must be above 685

For availing MSME loans, individuals need to qualify the following eligibility parameters-

  • Age should be within 24-70 years
  • Borrowers must have a business vintage of minimum 3 years
  1. Loan amount

The amount sanctioned for a business loan is higher than that of an MSME loan. But reputed NBFCs offer a substantial loan amount and flexible tenor for both loans depending on borrower’s eligibility.

Besides these aspects, borrowers must know that both the loans do not require any collateral. 

Moreover, the interest rates on both the loans vary from one lender to another and depend on one’s repayment history. Every individual must consider credit score as it determines a borrower’s creditworthiness and helps them avail substantial loan amounts at an affordable interest rate.

Thus, it is advised to improve one’s eligibility and research different financial institutions to avail either a business loan or MSME loan that suits their requirements.


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