Financing challenges faced by MSME business in India

MSME loans
MSMEs can even avail of a business loan for MSME to meet various business financial needs. Photo:

India is the fifth largest economy globally, and one of the biggest contributors to its growth is the MSME/SME sector. Small businesses are the backbone of the country’s economic growth and are spearheading the ‘Make in India’ initiative.

What’s more, MSMEs can even avail of a business loan for MSME to meet various business financial needs. This is important, considering there are various financial challenges that such businesses face especially during the initial stages. Let’s learn more about them and how they can be resolved.

Financial Challenges Faced by Indian MSMEs

While MSMEs are an integral part of the Indian economy, they still tend to face certain financial challenges that can affect their business operations. Let’s find out what these challenges are:

Lack of Financial Expertise - Since MSMEs tend to operate on a smaller scale, they might not have the funds to invest in financial expertise. This lack of financial acumen can often lead to improper fund management.

Poor Financial Management - As stated in the previous point, poor financial management can further pose a challenge to overall business operations. For example, a small business owner may be more focused on stocking inventory without investing in proper storage facilities. This could result in inventory damage or spoilage, which eventually results in losses.

Lack of Skilled Workforce - The success of any business largely depends on its workforce. The more skilled they are, the better the chances of a business gaining maximum growth. However, small businesses can’t always afford to hire multi-skilled professionals while being compliant with labour laws. This can lead to low productivity and a lack of investment in an affordable skilled workforce.

Limited Access to the Latest Technology - MSMEs don’t often have the required funds or access to invest in the latest technological advancements. This could prevent them from getting the necessary technologies that could improve various operations and help with business expansion.

Low Awareness Around Financial Assistance Products - Another major financial challenge that MSMEs face is the lack of awareness of funding sources. This could be about different forms of credit and/or financial assistance products like MSME loans. Such loans play a significant role in helping MSMEs fulfil any financial obligation that could otherwise hamper their growth.

What are the Various Benefits of a Business Loan for MSMEs?

Some of the biggest benefits of getting a Business Loan for MSME are as follows:

Quick Approvals - Applying for a business loan for MSME online ensures that your application receives quick approval if all loan conditions are fulfilled. This could include meeting the eligibility criteria and submitting the required documents on time.

Minimum Documentation - You only need to submit basic documents to verify the personal details, business details, and financial details of your company. These also help lenders in determining your creditworthiness.

Simple Eligibility Criteria - Some NBFCs have simple eligibility criteria for MSMEs that want to avail of a loan. While these could vary between lenders, the basic criteria remain the same.

No Collateral Involved - A business loan for MSME is collateral-free. This means you are not required to put any asset as security against the loan amount. This is great for small businesses that may not have sufficient assets to provide as collateral against a loan.

Attractive Interest Rates - Nowadays, you can find a business loan for MSME at competitive interest rates. This can further reduce your monthly EMI payments and help you manage your finances better.

Flexible Repayment Period - You can find lending institutions that offer MSME Loans with a flexible repayment period. Some even offer a business loan for MSMEs with a flexible repayment period of 36 months.

Availability of Business Loan EMI CalculatorAnother major benefit of applying for an MSME business loan online is the opportunity to calculate your EMIs. You can use a business loan EMI calculator to figure out your EMI payments and plan your loan application accordingly.

How to Apply for a Business Loan for MSME?

You can follow the steps mentioned below to apply online for business loan for MSME:

Step 1 – Visit the lending institution’s website

Step 2 – Select ‘Business Loan for MSME’ and click ‘Apply Now’

Step 3 – Fill up the application form for the loan

Step 4 – Provide all the required KYC documents if applicable

Step 5 – Authorize disbursal post-successful verification

Step 6 – Receive the loan amount in your bank account


While the financial challenges faced by Indian MSMEs are diverse, they can be managed easily with an MSME loan.

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