Mudra Loan For Small Business
Small businesses usually find it difficult to acquire the capital necessary for their growth and development. Since they generally don’t possess any major assets that can be pledged, obtaining business loans without collateral is often the only way to gain access to capital.
That said, the reality is that many small businesses may not qualify for collateral-free loans. Here’s where government schemes like the mudra loan scheme can help.
What is a Mudra Loan?
The Pradhan Mantri Mudra Yojana (PMMY), also known as the Mudra loan scheme, is a government scheme that was launched on April 08, 2015, by the Prime Minister of India. As per the scheme, micro and small business enterprises operating in the non-farm sector can avail of credit facilities ranging from ₹50,000 to ₹10 lakhs.
The credit facilities under PMMY loan application are disbursed through notified Member Financing Institutions (MFIs), Scheduled Commercial Banks (SCBs) and Non-Banking Financial Companies (NBFCs).
Also Read: Weavers Mudra Scheme
Who can Apply for the Pradhan Mantri Mudra Yojana (PMMY)?
Now that you’re aware of Pradhan Mantri loans for business, let’s take a look at the Mudra loan eligibility criteria that the borrowers need to satisfy to apply for the credit scheme.
- Eligible borrowers include individuals, proprietary concerns, partnership firms, private limited companies, public limited companies and other legal entities.
- Borrowers must operate in non-farm sectors such as trading, manufacturing, service and allied agricultural activities like poultry, animal husbandry, dairy and beekeeping, among others.
- Borrowers must possess a healthy credit history and a good track record of loan repayments with no record of default.
- Borrowers may be required to have the necessary expertise, skills, experience or knowledge required for the activity they propose to undertake.
- Borrowers may need to possess the necessary educational qualifications, depending on the nature of the activity they propose to undertake.
Purpose of the Pradhan Mantri Mudra Yojana
The primary objective behind the Pradhan Mantri Mudra Yojana is to provide financial assistance to micro and small enterprises operating in non-farm sectors. These entities often come under the ‘unserved and underserved’ section of society with little to no access to credit facilities.
Pradhan Mantri loans for small businesses aim to solve the credit crisis for the underserved section of society by providing loans without any collateral at highly affordable interest rates. Furthermore, the scheme is also expected to promote entrepreneurial spirit, create jobs and contribute to the economic development of the nation.
Quantum of Loan for Pradhan Mantri Loans for Business
The PM Mudra loans are offered in three different types – shishu mudra loan, kishor mudra loan and tarun mudra loan, each with a different quantum of loan.
Under the Shishu category, eligible businesses can avail loans of up to ₹50,000. Under the Kishore category of Mudra loans, businesses can apply for credit facilities ranging from ₹50,001 to ₹5 lakhs. Under the Tarun category, eligible businesses can avail loans of above ₹5 lakhs and up to ₹10 lakhs.
Benefits of the Mudra Loan Yojana
The Pradhan Mantri Mudra Yojana offers a plethora of different benefits for eligible borrowers. Let’s take a look at some of the key mudra loan benefits of this scheme.
1. Easy Access to Credit
Thanks to the relaxed mudra loan eligibility criteria of Mudra loans, micro and small enterprises can easily get access to credit for meeting their working capital requirements or for business expansion and development.
2. Financial Inclusion
By offering loans to borrowers with little to no access to traditional banking services, the Pradhan Mantri Mudra Yojana ensures financial inclusion of the marginalised, unserved and underserved sections of the society.
3. Flexible Loan Amounts
Eligible borrowers have the freedom to choose the amount of loan they wish to avail themselves. Depending on their requirements, they can get credit facilities ranging from less than ₹50,000 to a maximum of ₹10 lakhs under different mudra loan types.
4. Affordable Interest Rates
Unlike term loans and other credit facilities, the mudra loan interest rate is highly affordable. Such low rates ensure that micro and small enterprises aren’t burdened with high-interest repayments. This makes the mudra loan for small business owners a feasible credit option.
5. No Collateral Requirement
Mudra loans without collateral don’t require the borrowers to pledge any asset, making them suitable for even the most marginalised sections of society.
6. Zero Processing Charges
Unlike other traditional loans and credit facilities, borrowers of Mudra loans (Shishu and Kishore) are not required to pay any kind of processing fee at the time of loan application.
7. Boosts Entrepreneurship
By making it easy to gain access to credit, the Pradhan Mantri Mudra Yojana kindles the entrepreneurial spirit in individuals, empowering them to create more jobs and contribute to economic growth and development. It also supports mudra loan for women entrepreneurs, SC/ST individuals, and mudra loan for startups.
How to Apply for a Mudra Loan Online?
To apply for a Mudra loan online, all you need to do is follow the step-by-step guide mentioned below.
- Step 1: Visit the Udyamimitra website on your preferred web browser.
- Step 2: Under the ‘Programs’ tab, click on the ‘Mudra Loans’ option.
- Step 3: Scroll down and click on the ‘Apply here for Registration’ hyperlink.
- Step 4: You will be provided a list of three categories – New Entrepreneur, Existing Entrepreneur and Self Employed Professional. Choose the category you fall under and proceed to fill in details such as your name, email ID and mobile number.
- Step 5: Click ‘Generate OTP’ and enter the OTP that you receive on your mobile phone.
- Step 6: Proceed to fill out the application form. Make sure to enter the relevant information in all the mandatory fields.
- Step 7: Once your profile is complete, click on the ‘Apply Now’ button under the ‘Loan Application Center’ header.
- Step 8: Choose the category of Mudra loan you wish to apply for.
- Step 9: Fill out your business information such as the name of your business, activity and industry.
- Step 10: Fill out all the other information such as future estimates, existing credit facilities you’ve availed of, proposed credit facilities and your preferred lender.
- Step 11: Attach scanned copies of all the necessary documents to the application form and proceed to submit them.
That’s it. Once your Mudra loan application is submitted, you will receive a unique application number, which you can use to track the status of your application.
What is the Interest Rate of the Pradhan Mantri Loan?
Now that you’ve seen how to apply for Mudra loan online, let’s take a look at the mudra loan interest rate.
To ensure that borrowers aren’t burdened with high interest rates, the Reserve Bank of India has set certain limits. The mudra loan interest rate comparison may vary based on the lender category (MFI, SCB, NBFC). This makes it important for borrowers to conduct a mudra loan interest rate comparison before applying.
Documents Required for PM Mudra Loan to Apply
Before you apply for a Mudra loan online, it is crucial to ensure that you have all of the necessary documents ready. This will help you complete the application process much faster and reduce the chances of rejection. Below is the list for Mudra Loan Document requirement.
Documents Required for Shishu Loans
- Identity proof – PAN card, driving licence, passport, voter’s ID, Aadhaar or any other photo ID issued by government authorities
- Address proof – Aadhaar, voter’s ID, passport, property tax receipt or latest utility bill
- Identity and address proof of the business – registration certificate, licence copy or any other document evidencing the identity and address of the enterprise
- Colour passport-size photo not older than six months
- A quotation with the details of machinery and other items to be purchased, including their price and details of the supplier
Documents Required for Kishore and Tarun Loans
- Identity proof – PAN card, driving licence, passport, voter’s ID, Aadhaar or any other photo ID issued by government authorities
- Address proof – Aadhaar, voter’s ID, passport, property tax receipt or latest utility bill
- Identity and address proof of the business – registration certificate, licence copy or other any document evidencing the identity and address of the enterprise
- 2 passport-size photographs not older than six months
- Bank statements for the previous six months attested by the banker
- If the loan amount is ₹2 lakhs or more, balance sheets of the last two years along with income tax and GST returns for the same period
- If the loan amount is ₹2 lakhs or more, the projected balance sheets for the next year (for working capital loans) and projected balance sheets for the entire tenure (for term loans)
- Details of the sales achieved during the present financial year (up until the time of application submission)
- A detailed Mudra project report clearly outlining the technical and economic viability of the project
- In the case of the applicant is a company, a copy of the Memorandum of Association (MoA) and Articles of Association (AoA)
- In the case of the applicant is a partnership firm, a copy of the partnership deed
- In case there’s no third-party guarantee, a statement of assets and liabilities of the business enterprise and the directors or partners
Conclusion
The Pradhan Mantri Mudra Yojana is a game changer for micro and small enterprises. It simplifies the mudra loan process, enables easy access to credit with mudra loan collateral requirements being nil, and empowers mudra loan for SC/ST and women entrepreneurs.
If you’re seeking a government-backed credit initiative that supports your growth vision, the mudra loan for small business might be your best bet.
Frequently Asked Questions
1. What is PM Modi’s loan scheme for small businesses?
The Pradhan Mantri Mudra Yojana is a flagship loan scheme for small businesses. It was launched by Prime Minister Narendra Modi on April 08, 2015. According to the scheme, small businesses can avail of loans under three categories – Shishu, Kishore and Tarun, each providing a different quantum of credit.
2. What is the PM’s new loan scheme 2023?
The Hon’ble Prime Minister of India launched a new loan scheme known as ‘PM Vishwakarma’ on September 17, 2023. This new loan scheme is designed to provide craftspeople and artisans (Vishwakarma) with the financial support they need to hone their trade and climb up the value chain of the economy.
3. What is the 5 lakhs PM scheme?
Launched on September 23, 2018, the Pradhan Mantri Jan Arogya Yojana (PM-JAY) is a health insurance scheme for the economically weaker section of Indian society. Under PM-JAY, eligible families get a health insurance cover of ₹5 lakhs per family per year.
4. What is the Modi 3000 RS scheme?
The Pradhan Mantri Shram Yogi Maan-dhan (PM-SYM) is a unique scheme designed to offer financial support to unorganised workers during their old age. It is a voluntary pension scheme where eligible individuals who contribute to the scheme are entitled to receive a minimum assured pension of ₹3,000 per month once they attain 60 years of age.
