Mudra loan is a government-backed scheme that extends business loans and MSME loans to business owners, enterprises, self-employed professionals. Individuals are not required to submit any collateral to the concerned financial institution.
Micro Units Development and Refinance Agency (Mudra) loan under PMMY (Pradhan Mantri Mudra Yojana) can also be obtained by women entrepreneurs at affordable interest rates. Such funding options are segmented into 3 loan schemes Shishu, Kishor Tarun. Each comes with a different set of features and benefits. Read along to learn more about Mudra loans in detail.
Different Products of Mudra Loan
The Mudra loan has various defining features that segregate it from other financial products extended by the Government. The PMMY scheme extends three products to eligible entities, and their features are discussed below:
Shishu
Shishu loans are extended under the Mudra scheme that allows entrepreneurs to start a business by offering a business loan of up to Rs. 50,000. This amount is offered in the budding stage of business or looking to establish one. To acquire the amount, borrowers need to provide the following details:
- Quotation of purchased machinery and other items that need to be purchased
- Supplier details who are extending the plant and machinery
- Details of plant and machinery that has been bought
Kishore
Under this segment, borrowers can avail of a loan amount within the range of Rs. 50,001 and Rs. 5,00,000. They are ideal for business owners who need additional monetary assistance to expand their enterprise. Borrowers need to display a report containing the technical and economic viability of the business.
Following is the checklist of documents required to acquire the loan:
- Income and sales tax returns
- Memorandum of Association (MOA) and Articles of Association (AOA), if applicable
- A report ensuring the technical and economic sustainability of a business
- Bank account statement for the last 6 months
- Evaluated balance sheet for the next 1 year or loan duration
- Balance sheet of business in the last 2 years
Tarun
- Under the Mudra loan scheme, this particular product sanctions up to Rs. 10 Lakhs if the applicant meets certain eligibility parameters. Business owners willing to acquire Tarun loan, need to submit the following documents to ensure hassle-free approval:
- Applicants need to provide a certificate of SC, ST, or OBC if applicable
- Address proof
- Identity proof
Mudra loan and their benefits extend necessary financial support to start-ups and businesses in India. This further helped in generating employment and allowed entrepreneurs to expand their businesses efficiently.
Benefits of Mudra Loan
As per PMMY scheme, Mudra loan intends to function within a financial framework where loans are provided to non-farm people and SMEs where salaries are initiated through trades and services, key production etc. Moreover, businesses associated with verified agricultural activities can also avail of Mudra loan.
Nonetheless, here are the benefits associated with such a funding option:
- Some of the striking benefits of Mudra loan are that borrowers do not have to submit any high-end asset as collateral. Mudra loans have no processing fee or preparing charges.
- The Mudra loan scheme extends funds to minor and little ventures occupied with salary initiation.
- Mudra loans do not come with any specified credit balance. Besides, borrowers can withdraw the approved loan amount at their convenience, thereby negating the requirement to visit the branch.
- The credit offered under the PMMY scheme can be for store or necessities which are non-subsidised. Henceforth, borrowers can make use of Mudra loan plan for numerous purposes. Besides, the funds that Mudra loans offer, can be utilised for overdraft facilities or term loans or requests for bank certification and letters of credit.
- The interest rate against the loan amount does not exceed the rate of 1% every month. It is driven by the concerned financial institution and also the type of borrower.
Applicants will be entitled to a loan repayment period of 5 years, and the amount will be repaid in the form of EMIs to the concerned financial institution. However, they will not find it difficult to repay due to minimal financial costs. Based on the guidelines, Mudra loan allows business owners to jointly develop the enterprise without interrupting daily operations and funding.
Eligibility Parameters of Mudra Loan
Citizens associated with non-corporate, non-farming and MSMEs that reside in urban and rural India can apply for Mudra loan. The funds can be acquired through participating lending institutions such as MFIs, NBFCs. Nonetheless, to ensure hassle-free approval, applicants need to meet the following eligibility parameters:
- Shopkeeper
- Artisan
- Individuals associated with agriculture
- Start-up businessmen
- Small manufacturer
- Fruit and vegetable dealer
- Applicant’s age must not exceed the bracket of 18-65 years
Apart from meeting the eligibility parameters, business owners need to submit the following list of documents:
- Address proof
- Identity proof
- Loan application form
- Copy of caste certificate
- Copy of equipment or inventory purchase bill
- Copy of bank statement of last 3 months
- Business address certificate
- Two passport-sized photographs
By meeting the aforementioned eligibility parameters and submitting the necessary documents, borrowers can acquire Mudra loan. However, the interest rate will vary depending upon the applicant’s profile and business requirements, along with the lender’s discretion.
Application Process of Mudra Loan
Mudra loans can’t be utilised to fulfil personal requirements, and one needs to have an appropriate business plan before applying for credit. Below are some of the simple steps discussed to apply for Mudra loan online:
Step 1: Firstly, visit the official website of PMMY, a certified financial institution from where one can acquire the Mudra loan.
Step 2: Download the loan form (Shishu, Tarun or Kishore), whichever one requires and input personal and business details like name, DOB, educational certificates, business address certificate etc.
Step 3: Submit the application form. Ensure arranging the required documents while submitting them to the financial institution
Step 4: Once the Mudra loan application form is attached, processed and verified, the amount will be disbursed into the borrower’s account
However, borrowers must note that if they do not qualify for a Mudra loan, they can also apply for a business loan from reputed financiers’ websites. In addition, they can explore a wide range of business loans extended by reputed financiers at an affordable interest rate and flexible tenure.
To conclude, availing Mudra loan is beneficial as it encourages budding businesses to expand and function optimally. Besides, it eliminates the trouble of heading to a financial institution to acquire a loan and save substantial time. Apart from these, borrowers can also get a Mudra card to withdraw the approved amount after applying for the loan.
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