Business Loan for MSMEs: How to Get Approved Without Collateral
25 September 2026
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Small businesses are the backbone of India's economy, but getting funds on time can be a challenge. The good news is that many banks and NBFCs now offer business loans without collateral to MSMEs, traders, shop owners and professionals.
Types of business loans
| Loan type | Best for | Typical amount |
|---|---|---|
| Working capital loan | Stock, salaries, daily expenses | ₹1 Lakh – ₹50 Lakh |
| Term loan | Expansion, new outlet, renovation | ₹5 Lakh – ₹2 Crore |
| Machinery / equipment loan | Buying machines or vehicles | Up to 90% of cost |
| Overdraft / credit line | Seasonal cash-flow gaps | Based on turnover |
Eligibility for an unsecured business loan
- Business running for at least 2 – 3 years
- Annual turnover of ₹10 Lakh or more (varies by lender)
- Profitable for at least the last year, with ITR filed for 2 years
- Good CIBIL score of the business owner (700+)
- Steady bank transactions and GST returns
Documents you'll need
- PAN and Aadhaar of the owner / partners / directors
- Business PAN, GST certificate or Udyam registration
- Last 12 months' business bank statements
- ITR with balance sheet and P&L for 2 years
- Business address proof (rent agreement, utility bill)
Government schemes worth knowing
Pradhan Mantri Mudra Yojana (PMMY)
Collateral-free loans for micro enterprises under categories like Shishu, Kishore, Tarun and Tarun Plus, for amounts going up to ₹20 Lakh, through banks, NBFCs and MFIs.
CGTMSE
The Credit Guarantee Fund Trust for Micro and Small Enterprises provides a guarantee to lenders, so eligible MSMEs can get loans without collateral or third-party guarantee.
6 tips to get your business loan approved
- Keep your GST returns and ITR up to date.
- Route most sales through your business bank account.
- Avoid cheque bounces — they hurt your profile.
- Register on Udyam to access MSME benefits.
- Borrow only what your cash flow can repay.
- Compare multiple lenders — rates for the same profile can differ by several percent.
Frequently Asked Questions
Can a new business get a loan? Most lenders need 2 years of vintage. New businesses can try Mudra loans or a loan against property.
What is the interest rate on business loans? Unsecured business loans usually start from around 14% per year and depend on turnover, profit and credit score.
Looking for funds to grow? Apply on Best Home Loan and get business loan offers from multiple banks and NBFCs in one place.