How Startups can avail the Government's Mudra Loan Scheme?

Mumbai, November 25, 2020

Entrepreneurs usually require funding for ideas in order to scale up their business. Business financing helps them in this battle of fundraising, and the government of India has introduced Pradhan Mantri Mudra Yojana.

The scheme provides finance and loans to small businesses through MUDRA (Micro Units Development and Refinance Agency). The scheme is divided into three categories: Shishu, Kishore and Tarun loan. To avail Mudra loans, startups and entrepreneurs need to apply to banks, NBFCs or MFIs, choose a category that is more suited for the requirement, comply with the terms and conditions and avail the loan amount.

How Startups can avail the Mudra Yojana?

The MUDRA scheme is designed to support the startup ecosystem and nurture its further growth. To make a choice from various schemes of Mudra yojana, the entrepreneur must understand their requirements and match it with the criteria of each category of the scheme. The next step is to decide from where the mudra loan can be availed based on the interest rate offered by various lenders offering the scheme. Entrepreneurs can apply for a Mudra yojana from banks, NBFCs or MFIs or can apply for a loan online. To avail a mudra scheme you need to submit the required documents to get the loan approved. Every category has a different requirement for documentation, before applying for financial aid, one needs to understand the Mudra scheme well. For more information related to the scheme, interest rates and categories you can check with the official online portal or websites of the banks and financial institutions that support Mudra Yojana.

Types of Mudra Loan

There are three categories under the Mudra yojana for startups. They are as follows:

● Shishu: Mudra loan is provided to startups in their initial years and can be furnished up to an amount of Rs. 50,000. This loan is usually used to meet capital costs on infrastructure, set up equipment or make bulk purchases of raw materials to start the business.

● Kishore: This category of Mudra yojana falls in the bracket of Rs. 50,000 to Rs. 5 Lakh and it is aimed at increasing capital or expansion of business by the entrepreneur of an enterprise in its growth years.

● Tarun: This category for loan is ideal for financial requirements of over Rs. 5 lakh, but under Rs.10 lakh fall under the final category.

Mudra Loan Eligibility Criteria

Here are the Mudra loan eligibility criteria :

● The borrowers should be an Indian citizen to be eligible for the scheme

● The loan requirement should be not more than Rs. 10 lakhs.

● The businesses generating income from farming activities are not eligible for MUDRA yojana.

● Small enterprises based in rural and urban areas, can apply for Pradhan Mantri Mudra Scheme.

Who can apply for Mudra Yojana?

The following are the business entities that can avail the Mudra Scheme:

● SMEs related to agricultural activities.

● Artisans

● Small manufacturers

● Repairing shops

● Vendors and shopkeepers

● Textile industry

● Food production sector

● Truck owners

● Self-proprietors

● Service sector firms

Where to Apply for Mudra loan scheme?

MUDRA scheme under Pradhan Mantri Mudra Yojana (PMMY) can be availed by numerous eligible lenders. They are as follows:

● Private Sectors Banks

● NBFCs

● Commercial and Co-operative banks

● Small finance banks

● Regional Rural Banks (RRBs)

● Micro Finance Institutions (MFIs).

How to apply for Mudra Loan?

You can apply for a Mudra scheme with any public or private sector bank and present your business plan.

Given below are simple steps to apply for a Mudra loan online:

Step 1: Visit the online portal of the Bank, NBFCs or MFIs with which you wish to avail the Pradhan Mantri Mudra loan and download the form (Shishu, Kishore, Tarun) of the desired category.

Step 2: Once you’ve downloaded the form, enter all your required details like your Name, Date of Birth, Residential/ Business Address and educational qualifications, etc. in the application form.

Step 3: Submit the application form along with the required documents online.

Step 4: Once the loan application form and attached documents are processed and verified, loan shall be approved followed by the disbursal of loan amount in the form of a Mudra Card.

What is a Mudra Card?

The Mudra card is a type of credit card, which is issued to the borrower on disbursal of the Mudra yojana amount. Use of the Mudra yojana funds has been further eased for entrepreneurs availing the scheme by issuing debit cards. These cards ensure easy withdrawals from time to time as well as facilitate online transactions whenever required. The Mudra card can be used to purchase for your business requirements such as purchasing raw materials, new machinery, the funds can also be used for working capital where the cash and credit are arranged to the borrowers. The Mudra Card comes with a fixed limit of 20% on the loan amount, subject to a maximum amount of Rs 10,000.

(Disclaimer: This is branded content. Readers are advised to exercise due diligence and discretion before entering into any correspondence, investment, purchase, business dealings or any other decision on the basis of this content.)

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