Launched on April 8, 2015, the Government of India designed Mudra loan under the Pradhan Mantri Mudra Yojana (PMMY) scheme for small business owners. It aims to meet the financial requirements, such as operating costs of small businesses.
Individuals operating small businesses, micro-units and MSMEs are eligible to apply for this scheme. The term “MUDRA” refers to Micro-Units Development and Refinance Agency and aims to provide financial assistance through different financial institutions and improve their business.
Eligibility criteria to avail Mudra loan
To avail a Mudra loan, borrowers are not required to submit any collateral and the processing fees are minimal. Following are some of the eligibility parameters that borrowers need to meet to avail financial assistance under this scheme:
- Individuals who are small manufacturers, artisans, shopkeepers and non-farm income-generating businesses in sectors like services, manufacturing and trading are eligible to avail the loan.
- The loan requirement should be within Rs.10 lakh or lower than that.
- Individuals must be associated with agricultural services since 1st April 2016.
- An applicant must be a minimum of 18 years and a maximum of 65 years old.
Besides, borrowers need to produce certain documents required for a business loan to substantiate their eligibility and ensure quick approval. Though the required documents will differ with lenders, some common ones are-
- KYC documents
- Business establishment certificate
- Appropriately filled application form with recent passport size photographs
- Business address proof
- Financial statement of last 6 months
- Business establishment certificate
Aspiring female entrepreneurs can also avail a Mudra loan for women to establish and boost their businesses. Mudra loans can be availed to meet different business purposes, and the interest rate depends on the applicant’s profile.
With multiple benefits offered by this scheme, individuals can meet different business requirements, such as working capital needs, purchasing machinery, business expansion, recruiting professional staff, business reformation etc.
What is a Mudra loan scheme?
The Mudra loan is offered to eligible borrowers with a loan amount ranging from Rs.50, 000- Rs.10 lakh based on three categories: Shishu, Kishor, and Tarun. This scheme aims to assist small-scale businesses from profit and non-profit sectors to establish their business.
Depending on the growth, funding requirement and development of a business, beneficiaries can avail loans under this scheme.
Features of a Mudra Loan
Following are some of the features of a Mudra loan that makes this scheme unique among other schemes offered by the Government:
- Both new and existing companies can apply for this scheme.
- Usually, the tenor of Mudra loan ranges from 3-5 years based on the processing time.
- The interest rate of Mudra loan is quite affordable and does not exceed 1% every month
- This scheme primarily offers financial assistance to the industries associated with manufacturing, services and training sectors.
Alternatively, individuals can opt for affordable personalized business loans from different financial institutions at flexible repayment terms. These NBFCs provide substantial loan amounts to small businesses without any collateral.
Besides, eligible borrowers can also enjoy exclusive pre-approved offers on a wide range of financing options that expedite and accelerate the application process. These offers are available on business loans, credit cards, etc. Intending borrowers can also check pre-approved offers by mentioning their name and contact information.
By meeting the Mudra loan eligibility parameters and producing required documents, consumers can have a seamless borrowing experience and focus on the business, not the cash flow gaps.