Finance Financial Advice

Everything you need to know about MUDRA Loan

What is Mudra Loan?

Mudra Yojana is a government-sponsored loan scheme that allows individuals and MSMEs to borrow up to Rs. 10 lakh to establish a new business or expand an existing one. Moreover, the Mudra loans are offered without submitting any collateral or security.

What is MUDRA Yojana?

The Micro Units Development and Refinance Agency (MUDRA) Loan Scheme, also known as the Pradhan Mantri Mudra Yojana, is a government of India initiative. It provides loans to individuals and MSMEs from banks and NBFCs. MUDRA Yojana is available in three lending schemes: Shishu, Kishor, and Tarun.

Mudra Loan

Financial institutions offer collateral/security-free loans under the Mudra scheme. Moreover, the payback terms ranging from 12 months to 5 years as well as flexible EMIs option. However, only Individuals, MSMEs, enterprises, or businesses engaged in manufacturing, trading, or services sectors can apply for the Mudra scheme.

Features of Mudra Loan

  • Interest Rate: It varies from bank to bank and the evaluation is according to the business requirements.
  • Mudra Scheme Types: Shishu, Kishor, and Tarun.
  • Minimum Loan Amunt: There is no minimum limit.
  • Maximum Loan Amount: Up to Rs. 10 lakh in maximum loan amount.
  • Collateral/Security: Banks and NBFCs do not require it.
  • Processing Fees: No processing charges.
  • Repayment Tenure: From 12 months to 5 years.

Types of Loan Schemes under MUDRA Yojana

Loans under the Pradhan Mantri Loan Yojana (PMMY) are categorized into three schemes: Shishu, Kishor, and Tarun. The loan amount available under each lending scheme is listed below:

  • SHISHU Loan: The Mudra Shishu Loan scheme offers loans up to Rs. 50,000. This scheme is for start-ups as well as new businesses.
  • KISHOR Loan: Loans ranging from Rs. 50,001 to Rs. 5,00,000 are available under the Kishor Loan Scheme. It is for the purchase of equipment/machinery, raw materials, as well as business expansion for existing businesses.
  • TARUN Loan: The Tarun Loan Scheme provides loans ranging from Rs. 500,001 to Rs. 10,00,000. This scheme is for established industries and organizations.

Advantages of Mudra Loan

  • Individuals, retailers, shopkeepers, traders, vendors, and MSMEs in the manufacturing, trading, and service sectors are the primary recipients of Mudra loans.
  • Mudra program is working under the Government of India’s Credit Guarantee Schemes.
  • Term loans, working capital loans, as well as overdraft facilities can all be used with the borrowed funds.
  • Mudra loans are available to all non-farm enterprises, i.e. small or micro businesses that generate money.
  • People belonging to the SC/ST category can also get Mudra loans with lower interest rates.
  • Mudra card is a form of debit card given to borrowers that can be used to withdraw loan funds according to company needs. Hence borrowers can withdraw the total available loan money in form of installments via Mudra card.

Purpose of Mudra Scheme under PMMY

The following is a list of businesses that are eligible for the Mudra scheme and their income-generating activities:

  • Commercial Vehicles: Mudra loan for machinery and equipment can be used to purchase commercial transport vehicles. Including tractors, auto-rickshaws, taxis, trollies, tillers, goods transport vehicles, 3-wheelers, e-rickshaws, and so on.
  • Service Sector Activities: Starting businesses in the service sector, such as salons, gyms, tailoring shops, medical stores, repair shops, etc.
  • Food and Textile Product Sector Activities: Various activities in the food and textile product sectors, such as papad, achaar, ice cream, biscuits, jam, jelly, and sweets production. As well as agriculture produce preservation at the rural level.
  • Business activities for Traders and Shopkeepers: Business activities, such as setting up stores, service firms, trading and business activities, and non-farm income generating activities are all examples of Business activities for Traders and Shopkeepers.
  • Equipment Finance Scheme for Micro Units: Maximum loan of Rs. 10 lakh
  • Agri-allied Activities: Activities related to businesses in agri-clinics and agri-business centres, food & agro-processing units, poultry farming, pisciculture, beekeeping, sorting, livestock-rearing, etc.

How to Apply for Mudra Loan?

how to apply for mudra loan

You can download the application form at mudra.org.in and fill in all of the essential information. However, it’s possible that different banks have slightly different application methods. Thus, it is advisable for you to visit the nearest branch of the bank where you wish to receive the Mudra loan and submit the correctly filled application form along with the necessary bank paperwork.

Documents required for Mudra Loan

  • Application filled with all the required information and passport-sized photos
  • Applicant and Co-applicants’ KYC documents: Passport, voter identification card, Aadhar card, driver’s license, PAN card, as well as utility bills (water/electricity bills)
  • Proof of special categories, such as SC, ST, OBC, Minority, etc (if applicable)
  • The bank statement for the previous six months
  • Documents for business address and tenure proof, if necessary
  • Any other paperwork that the bank requires

Note: In the case of Shishu, the Mudra loan application form must be completed and filed separately, whereas the Kishor and Tarun loan applications are comparable.

What is Mudra Loan for Women Entrepreneur?

mudra loan- women empowerment.

Mudra Yojana, as part of the PMMY, encourages women entrepreneurs. Moreover, the banks and the Micro Finance Institutions (MFIs) bolster this scheme by providing credit facilities for women borrowers at lower or concessional interest rates. Mudra currently offers female businesses a 25 basis point (BPS) discount on financing rates offered by NBFCs and MFIs. The maximum credit amount available to women entrepreneurs under the Mudra Yojana is Rs. 10 lakh. Women’s Mudra loan eligibility is the same as it is for individuals and businesses.

For more such updates, keep watching this space!

Finance Financial Advice

Am I eligible for MSME funding? Check out all the requirements here!

It is a dream for many people to become an entrepreneur and run a successful business. To run any business, we need capital. While many people initially invest their own money in their entrepreneurial journey. People also apply for loans to fund their businesses. The government of India is trying to boost the Indian Entrepreneurial landscape through various schemes and policies. One such product to help the entrepreneurs of emerging India is MSME loans.

What is MSME?

MSME Loans, also known as Micro, Small, and Medium Enterprise Loans, are forms of loans available to business owners and entrepreneurs. This form of loan provides you with working capital that you can utilize for a variety of things, including buying new goods, purchasing new equipment, paying your employees’ salaries, and expanding your firm. In India, a variety of lenders provide MSME loans to their consumers. Interest rates differ from one bank to the next.

Micro, Small, and Medium Enterprises (MSME) can be classified into two parts:

  1. Manufacturing enterprises participating in the manufacture or production of items for any industry. Or a company in the process of adding value to a finished product with a distinct name, character, or use.
  2. Service enterprises engaged in providing or performing services.

According to the revised classification w.e.f, July 1, 2020; MSMEs are now defined on the basis of Composite Criteria of “Investment in Plant & Machinery / Equipment and Annual Turnover”.

MSME Classification (Manufacturing Enterprises and Enterprises Rendering Services)

classification of MSME
01

Micro-Enterprise

Micro Enterprises are the firms with an annual turnover is not more than Rs. 5 Crore. Investment in Plant & Machinery or Equipment is not more than Rs. 1 Crore.
02

Small Enterprise

Small Enterprises have an annual turnover of not more than Rs. 10 Crore. Investment in Plant & Machinery or Equipment is not more than Rs. 50 Crore.
03

Medium Enterprise

Medium Enterprises have an annual turnover of not more than Rs. 50 Crore. Investment in Plant & Machinery or Equipment is not more than Rs. 250 Crore.

Why you should apply for a business loan?

Business loans can be utilized to start a new firm or stepping-up an existing one (expansion, diversification, modernization, technology up-gradation). These can be used for the following purposes:

  1. The purchase of a factory, as well as the acquisition of land and the construction of building spaces,
  2. Purchase of plant and machinery, such as laboratory and testing equipment, furnishings, and electrical fixtures
  3. Meeting working capital needs, such as raw materials, work-in-progress, and finished commodities, among others
  4. Trade Finance (Bill Discounting) – to pay creditors while waiting for the payment from debtors.
  5. Launch of a new product line, business expansion, warehouse requirements, marketing and advertising credit
  6. Additional monitoring support for any reason that qualifies.
Msme loans documentation requirement

MSME loans are available to Micro, Small, and Medium Enterprises (MSMEs) for the expansion of existing firms or the start-up of new businesses. Generally, MSME loans have interest rates that start at 7.65% per annum. The loan amount approved can be as low as Rs.50,000 and as high as a few crores. Moreover, the loan repayment period might be up to 15 years depending on the loan amount approved.

Eligibility Criteria for MSME loan

lender. The requirements will differ from one bank to another, and even depending on the sort of scheme available. However, the following are the general requirements you must meet:

  1. Types of business: Manufacturing Sector, and Service Sector

  2. Size of business (in terms of investment):

    • Manufacturing Sector: The size of the business in Manufacturing Sector has to be less than Rs.25 lakh for Micro enterprise; Rs.5 crore for Small enterprise; Rs.10 crore for Medium enterprise.
    • Service Sector: The size of the business in Service Sector has to be less than Rs.10 lakh for Micro enterprise; Rs.2 crore for Small enterprise; Rs.5 crore for Medium enterprise.
Am I eligible for msme funding

What documentation are necessary to apply for an MSME loan?

The lender asks borrowers for legal documents necessary to analyze their eligibility for the loan. These documents may vary from one financer to another. However, these are the documents that are commonly required for MSME loan applications.

apply for business loan
  1. Identity Proof: PAN card, Aadhaar card, Voter’s ID, passport
  2. Residence Proof: Rental agreement, ration card, utility bills
  3. Proof of Business Address: Rental agreement, lease agreement, utility bills
  4. Proof of Income: P/L account and balance sheet copies of last 2 years
  5. Tax documents: IT returns, sales tax return, PAN card,
  6. Proof of securities provided: Photocopies of title deeds/lease deeds offered as securities
  7. Other documents: Projected balance sheet, project report, etc.

Note: The above list of documents is only informative. Applicants may be needed to submit additional documents depending on the lender’s requirements.

How to apply for MSME Loan?

There are two methods for submitting an MSME loan application. If the lender offers an online application, you can fill out the form with the relevant information and submit it through the website.

Alternatively, you can go to your local bank and ask for an application form. You can call beforehand to find out what documentation is required. For more such updates, keep watching this space!

Business Daily News

PM Modi Calls the Inclusion of Retail, Wholesale Traders as MSMEs ‘landmark’ Step, Says Committed to Empowering Traders.

Prime Minister Narendra Modi termed revised guidelines for MSMEs as a landmark step. He said that this move would help the traders boost business. It would also give them various benefits. Traders were waiting for this decision for since long.

Union Minister of MSMEs and Road Transport and Highways, Nitin Gadkari on Friday announced revised guidelines for MSMEs with the inclusion of retail and wholesale trade as MSMEs. Official sources explain that the move will have an immediate impact on smaller retailers and wholesalers with businesses up to Rs. 2.5 crores. He tweeted that retailers and wholesalers will come under the definition of MSMEs.

Earlier traders and wholesalers were facing lots of problems when they were not considered MSMEs.While applying for the loan they were not considered in the definition of MSMEs and hence never get any financial benefit out of it. Now every business person can get the benefits for the same. This is really an appreciable step for all traders and businessmen.

What is Udyam Registration Portal?

udyam portal

Udyam Registration Portal helps the business person to get the Government tenders. Due to Udyam, the loans get cheaper. The interest rate on these loans is up to 1.5% lower than the interest rate on regular loans. For the facilities, Higher preference is always given to businesses that are registered under Udyam for Government licence and certification.

All the traders and wholesalers will now be able to register themselves on the Udyam portal under newly revised guidelines.

How much time does it take?

Udyam registration takes around four to five working days for the issuance of the certificate. Usually, you get an email alert with the registration number and important details regarding the certification.

Is GST mandatory for Udyam MSME registration?

No, the GSTIN number is not mandatory for registration. The Ministry of Micro, Small, and Medium Enterprises notified that there is no need for GSTIN for MSME Udyam registration.

With this Traders will be availing of immediate-term finance as part of various schemes announced under the “Atma-nirbhar Bharat” program. this landmark decision will have a structural impact on the sector. It will be further formalized by giving better finance options for businesses that went to get structured. In addition to it, it will give retail MSMEs the support they need to survive, revive and thrive.

Interestingly, Retail and trade associations have welcomed the move. They say it will enable traders to get access to needed capital having been impacted greatly due to the pandemic.

For more such updates, keep watching this space!