Getting an MSME business loan is a crucial step for small and medium enterprises (SMEs) looking to grow. Whether you need funds to expand operations, buy equipment, or manage working capital, choosing the right lender is important. Not all lenders offer the same benefits, and picking the wrong one could lead to high costs and unnecessary hassles.

If you are looking for an MSME loan for new business, it is even more critical to compare lenders wisely. Here are four key factors to consider when selecting the best loan provider for your business.

1. Interest Rates and Charges

One of the first things you should compare is the interest rate. A lower interest rate means lower EMI payments, reducing the financial burden on your business. However, don’t just look at the interest rate—also check for hidden charges. Some lenders may charge processing fees, prepayment penalties, and late payment fees, which can increase the overall cost of the loan.

For an MSME business loan, banks generally offer lower interest rates compared to NBFCs and fintech lenders. But NBFCs might provide easier approval and faster disbursement. Weigh your options carefully before deciding.

2. Eligibility and Documentation Requirements

Each lender has different eligibility criteria for providing an MSME loan for new business. Some lenders require high credit scores and a long business history, while others may be more flexible. If you are a startup or a new business, look for lenders who offer loans based on future growth potential rather than past financial records.