MSME loan without collateral

Micro and small enterprises can borrow from banks without mortgaging property. Up to ₹20 lakh, RBI does not allow banks to ask an MSE for collateral at all (for loans sanctioned from 1 April 2026). Above that, and up to ₹10 crore, the bank can cover the loan under the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) instead of taking property.

Starting rates today

As on 26 Oct 2026, RBI repo rate 5.50%. Indicative ranges; your rate depends on your profile.

See today’s rates from every lender →

Who is eligible

• Micro or small enterprise with Udyam registration (manufacturing, services or trading)
• Not a defaulter with any bank or NBFC
• Repayment capacity: cash profit at least about 1.25 times the yearly EMIs (DSCR)
• Most banks look for a credit score of 650–700 or more for the promoters
• Agriculture, SHGs and loans already covered by another guarantee are excluded

How much you can get

• Term loans: usually up to 75% of the project or asset cost; you bring the rest
• Working capital: about 20% of yearly turnover for limits up to ₹5 crore (turnover method)
• The final amount is capped by repayment capacity – lenders work back from DSCR
• A yearly guarantee fee (roughly 0.4%–1.2% depending on size) is normally passed on to the borrower

Documents

• KYC of the business and all promoters
• Udyam and GST registration
• ITR and audited financials for 2–3 years
• GST returns and bank statements for 12 months
• Project report or CMA for larger term loans

Tips from our credit panel

• Ask the bank to cover the loan under CGTMSE – there is no separate application
• If you have some property, ask for hybrid security: property for part and CGTMSE for the rest; the fee applies only to the uncovered part
• Floating-rate loans to MSEs from banks carry no prepayment charges (RBI), so refinance later if a better rate comes

Common questions