Best Ways to Avail of A Mudra Loan for A Small Business

The Pradhan Mantri Mudra Yojana is a flagship scheme launched by the Central Government on 8th April 2015 to provide loans up to Rs.10 lakh to non-corporate, small or micro-enterprises without pledging any collateral. The credits are available through Mudra Loan under the PMMY scheme and are offered as three different products – “Shishu”, “Kishore”, and “Tarun”.

As per an official report, around 42.5 million applicants acquired loans under this scheme till 2019, and 20.6% of beneficiaries utilised the funds to set up a new establishment, while the remaining expanded their existing enterprise. It is to be noted since Mudra is a refinancing organization and therefore does not directly lend credit, beneficiaries need to avail the funds from affiliated NBFCs.

Funding under Mudra

Financing will be extended to those who require an amount below Rs.10 lakh to establish micro-units and are qualified for such small business loans. Applicants can increase their eligibility by maintaining a good credit score, excellent repayment history, having no loan defaults.

Below listed are some of the eligibility factors that business owners need to follow before availing of a loan through Mudra.

Qualifying parameters for Mudra loan

  • The prospective applicant’s age should range between 18- 65 years.
  • Individuals, entrepreneurs, MSMEs, manufacturers, retailers, traders, SMEs and more are eligible for the credit.
  • Applicants should have a good repayment history to maintain a high credit score since business credit report matters when applying for a loan.
  • Individuals belonging to other categories like SC/ST/OBC can apply for the loan.
  • Applicants should not have defaulted any loan payment with any financial institution previously as it will leave a bad impact on the credit profile.
  • The applicant should be a resident of India with no criminal record.

Determining the category under Mudra

These loans are disbursed under three different categories – 

  • Shishu: Under this category, businesses in their nascent stage can avail of up to Rs.50,000 and finance the entire set-up and more.
  • Kishore: Under this category, businesses can avail of up to Rs.5 lakh funding. Business owners looking for suitable funding options at a competitive interest rate to expand their small businesses can apply with this category under the PMMY scheme. This fund will help them to meet working capital requirements, purchase advanced equipment and more.
  • Tarun: Established business looking for funding to meet varied operational expenses can avail up to Rs.10 lakh under this category of Mudra loans.

Business owners can determine how much working capital the business needs and apply under any of the above-mentioned categories of Mudra loans. However, if individuals fail to qualify this scheme’s eligibility parameters, they can look for business loans from reputed financial companies like Bajaj Finserv.

The NBFC also extends pre-approved loan offers for its existing customers to make the entire loan application process simplified and hassle-free. These offers are extended for several financial products like personal loans, business loans, etc. You can also check your pre-approved offer instantly by entering essential details like your name and contact information.

The application process of Mudra Loan

Step 1: The applicants must keep all the documents ready before initiating the application process. The checklist of documents include:

  • Identity proof: Aadhaar card, Voter ID, PAN card, etc.
  • Business documents: Business registration certificate 
  • Address proof: Electricity bill, ration card, telephone bill, etc.
  • Financial documents: Income proof and account statement of the past 6 months

Step 2: Borrowers need to visit the online portal of their preferred lender for the Mudra loan, and

  • Duly fill the application form
  • Provide all the relevant information and re-check before submitting

Step 3: Your chosen financial lender will contact you after going through your application.

  • Here, an applicant needs to decide the amount they want to avail.
  • Also, pay the processing charge (if applicable).

After successfully verifying the application form, a financial lender will sanction the fund and disburse it directly to the applicant’s account. One can utilise the amount availed under a Mudra loan to serve any business requirements.