Mudra loan: How to Qualify and Apply for One
MUDRA or Micro Units Development and Refinance Agency Ltd. is an organisation that provides funding to small and micro businesses under the Pradhan Mantri MUDRA Yojana. This agency extends refinance support to banks and member financial institutions that sanction loans to MSMEs. As an MSME/SME or business owner, you can apply for a Mudra loan of up to Rs.10 lakh, which you can use to fund a range of tactical and developmental requirements.
Take a look at Mudra loan eligibility and other application details to benefit from it.
Which SMEs can apply for Mudra loan?
Any Indian citizen who runs a business to generate an income, independent of farming activities, is eligible for the Mudra loan.
The company or organisation should be engaged in manufacturing, processing, or trading or can be a part of the service sector.
Any business that is part of the non-Corporate Small Business Segment (NCSB), which comprises of millions of proprietorship or partnership firms running as small manufacturing units, service sector units, shopkeepers, fruit or vegetable vendors, truck operators, food-service units, repair shops, machine operators, small industries, artisans, food processing units and others, operating within the rural and urban framework is eligible to apply for a Mudra loan.
What are SMEs eligible to receive?
Once you have checked your eligibility for Mudra loans, you can avail a collateral-free sanction of up to Rs.10 lakh on behalf of your micro and small enterprise.
You do not have to pay any processing fee in order to avail a sanction. Also, there is no minimum cap on the sanction amount.
Your loan is sanctioned under three heads:
- Sishu Loans up to Rs.50,000
- Kishor Loans up to Rs.5,00,000
- Tarun Loans up to Rs.10,00,000
To fuel the growth of your business, you can apply for a loan with any of the Mudra partner financial institutions.
The rate of interest and terms of the loan are unique to the bank or NBFC you are applying with, but the overall terms are flexible and monitored by the RBI to offer you maximum convenience and affordability.
What are the purposes for which you can use the funds from your Mudra loan?
The Mudra loan has been created keeping a multitude of business uses in mind. Here is what you need to know:
- Based on your business model, if you are a vendor, trader, shopkeeper, or engage in other service sector activities, you can avail a working capital or regular business loan, transport vehicle loan or equipment finance as a Mudra loan.
- You can use the loan to fund the purchase of transport vehicles for goods and personal transport such as auto rickshaw, small goods transport vehicle, 3 wheelers, e-rickshaw, passenger cars, taxis, etc.
- You can fund the operations and setup cost of your saloon, beauty parlour, gymnasium, boutique, tailoring shop, dry cleaning, cycle and motorcycle repair shop, DTP and photocopying shop, medicine shop, and courier franchisee.
- You can engage in food product manufacturing like papad making, achaar making, jam or jelly making, and more. Fund the procurement of raw materials and setup cost with your sanction from Mudra loan.
- You can set up apparel industry units like handloom, power loom, khadi, chikan, zari and other textile activities. Rely on the Mudra loan to fund labour and machinery costs.
- As per the eligibility alterations proposed in 2016-17, industries allied to agriculture like pisciculture, bee keeping, poultry, livestock, rearing, grading, sorting, aggregation agro industries, diary, fishery, and more are also covered under Mudra loans. So, if your MSME is a part of this sector, you can easily meet your needs with the Mudra loan.
How can partner institutions become eligible for the Mudra loan?
Apart from SMEs, the financial institutions also have to abide by certain eligibility norms in order to sanction a loan basis this scheme.
As per the basic eligibility for Mudra loans, scheduled commercial banks, small finance banks, microfinance companies, and NBFCs can be lending partners.
However, all financial institutions need to have a valid registration and abide by the parameters set for profit, Non-Performing Assets, business vintage and others to become a partner.
In the financial year 2018-19 approximately Rs.2,53,604 crore was sanctioned as Mudra loans.
This figure is a sharp rise from the amount of Rs.1,37,449.27 crore that was sanctioned in financial year 2015-16, which the year when mudra loans were first introduced.
As an SME owner, you can benefit from this government loan when you need funds. However, if your demand for finances is more than Rs.10 lakh, you can easily apply for the Bajaj Finserv SME Loan and benefit from an affordable sanction of up to Rs.30 lakh.
You can use this loan to fund your working capital, machinery, as well as other business-related needs.
Moreover, if you avail the sanction as a Flexi Loan, you can borrow funds from your total sanction in parts, multiple times.
Here interest is charged only on the amount you use. Additionally, you can also choose to repay the loan as interest-only EMIs and pay the principal at the end of the tenor.
This way, you can manage your cash flow better. To initiate the process, check your pre-approved offer and apply for a deal that has been specially customised for you.
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Category: Debt
