The Pradhan Mantri Mudra Yojana aims to encourage entrepreneurship amongst the non-corporate units with financial assistance. Micro unit owners can avail loans up to Rs. 10 Lakh under the PMMY scheme from banks, NBFCs and other financing institutions. The start-up loan should be utilised for income-generating activities in a non-farm sector like the service sector, manufacturing or processing unit.
- PM Narendra Modi launched the MUDRA scheme on 8th April 2015.
- Over 90% of the Non-Corporate Small Business Sector has no access to any formal financing source.
- Individuals from the socially backward group run 66.2% of the Indian MSMEs.
- Provisional data shows 65,62,325 loans with a value of Rs. 35,002.15 Crore were sanctioned in FY 19 – 20.
Categories of the loans under MUDRA scheme
It is vital to understand MUDRA loans under PMMY before applying. The loans are classified into 3 groups depending on a business’ financial requirements and growth stage.
Shishu is the 1st category of MUDRA loan designed for micro-units or small start-up owners who need a small capital to start their venture. Under this scheme, borrowers can avail loans up to Rs. 50,000. However, they need to state their business idea clearly for quick approval on the loan application.
Kishor is the 2nd category of loan created for small businesses which are already established and wish to strengthen their foundation. Applicants can avail a loan amount within Rs. 50,000 to Rs. 5 Lakh. The application process may vary with lending institutions. Borrowers need to submit relevant documents showcasing the current business position along with an application form.
The Tarun category is for well-established small businesses that are looking forward to business expansion. Owners can avail MUDRA loan from Rs. 5 Lakh to a maximum of Rs. 10 Lakh.
While processing fees are nil, the application process and interest rates vary with financial institutions. You can approach the one offering a simplified method and competitive rates. Ensure to utilise the funds received via MUDRA to increase working capital, spend in marketing or obtain capital assets for the enterprise’s growth.
Advantages of the PMMY scheme
- You can avail MUDRA debit card for instant access to money.
- Being unsecured, borrowers need not keep any collateral and risk their assets on defaulting.
- Understand the working capital lifecycle and address its needs quickly with loans under PMMY.
- Small businesses in both urban and rural areas can avail the MUDRA scheme benefits.
- The repayment tenor stretches up to 5 years. Opt to repay the start-up loan in full within a shorter tenor according to your financial plans.
- Only a few documents are needed to apply for this advance.
- Under the Pradhan Mantri Jan-Dhan Yojana, you can take up to Rs. 5,000 as overdraft facility.
Who are eligible to borrow under the PMMY scheme?
Public sector companies, private firms, proprietary firms, individual business owners or other legal business entities can borrow under this government-initiated scheme. However, the applicant must hold a good CIBIL score with no record of default to avail MUDRA financing. Also, it is essential to prove the applicant’s experience or skill in starting or expanding a venture.
An alternative solution to business financing
If you need high-value financing, you can always avail funds up to Rs. 30 Lakh from lenders like Bajaj Finserv. The collateral-free start-up loan comes with no end-usage restriction. So, you can utilise the finance for a host of monetary requirements, including the hidden costs in running a business.
To apply for MUDRA Loan, you can download the application form online from the official website. Fill up and submit the form along with the required documents in the nearest branch. Make your entrepreneurship dream come true and flourish with optimum financial assistance.