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Mudra Loan vs Business Loan: Which is Better For You?

By Finserv MARKETS - Feb 22,2020
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If you didn’t have an exact idea about the growth of the business sector in India in the past few years, figure this. In 2019, for every 100 companies in India, there were more than 95 micro enterprises, four small-to-medium businesses, and less than one large company. Incredible, isn’t it? Of all the factors responsible for this spurt, loans are an important one.

Two of the most sought after sources of loans for businesses, especially smaller ones, right now are government-backed Mudra loans and business loans by banks, NBFCs, MFIs. Before getting into comparisons, let’s have a brief look at what each one entails.

What is a Mudra loan?

Mudra means Micro Units Development and Refinance Agency Ltd. Launched under the Pradhan Mantri Mudra Yojana in 2015, it aims to provide financial help to small, new, and upcoming businesses. It also has other projects for development of the small businesses sector. However, financing is the primary one.

Mudra Loan Vs Business Loan

What is a business loan?

Business loan is nothing but a credit product offered by NBFCs and banks. It is meant to help entrepreneurs fulfill their business requirements, expansion plans, capital expenditure, etc. Businesspersons are liable to repay the loan with interest as per terms of the loan.

You can also avail for mura loan for women only at Finserv MARKETS

Bajaj Finserv Business Loan

If you have already set your mind on getting a business loan, the Bajaj Finserv Business Loan, available on Finserv MARKETS, would be a great choice. It caters to the needs of both startups and MSMEs. You would be surprised to know that you can get your business loan approved online within just 3 minutes time. What’s more, disbursal will take only about 24 hours! You also get to flexibly choose a tenure between 12 to 60 months as per your convenience.

Business Loan Apply Online

Key difference Between Mudra Loan and Business Loan

Interest Rates

Interest rate is the primary aspect that a borrower takes into account when applying for any kind of loan.

For Mudra loan schemes, the interest rate is dependent on the bank from which you are applying for your loan. It starts from 8%.

For business loans, there is a flourishing market with a lot of buyers and a lot of sellers. Sellers have therefore become very competitive, especially with interest rates. NBFCs try to offer business loans at really low rates possible in order to attract more and more businesspersons.

Eligibility

When it comes to eligibility, Mudra loans under Pradhan Mantri Mudra Yojana provide loans to the following business owners and purposes:

  • Shopkeepers, traders, vendors and service sector allied business owners
  • Equipment for micro units
  • Agri-related non-farm activities (beekeeping, pisciculture etc)
  • Financing for certain commercial vehicles, tractors and tillers.

Business loans, on the other hand, are a lot more accomodating in this regard. The eligibility criteria usually consists of the following.

  • Business vintage (minimum two years)
  • Previous year’s ITR (minimum Rs. 1.5 lakhs)
  • Minimum turnover of Rs. 5 lakhs
  • Place of business and house have to be different
  • Owner of business should own either a house or a business place

Documentation

A Mudra loan, as you’d expect, requires a lot more documentation than a business loan. Here is the list of documents required for availing one.

  • 2 passport size photographs
  • Your personal id proof (Passport, PAN card, voter ID, driving license, or Aadhaar card)
  • Business address proof
  • If business premises are rented, rent agreement for the same
  • Your personal address proof (telephone bill, latest electricity bill, passport, Aadhaar card, voter id, etc.)
  • Id proof of your business establishment
  • SSI registration certificate
  • Memorandum of Association and Articles of Association (in case of a company)
  • Partnership deed (in case of partnership businesses)

If the loan is for an amount more than Rs.2 lakhs, the following additional documents are also required

  • Balance sheet for the last two years (audited) along with income tax and sales tax
  • Pollution board’s clearance certificate

If you do not want to deal with this exhaustive list, you can always opt for a business loan. You will need minimal documents, which will mostly include the following.

  • Business address proof
  • PAN Card
  • Previous two years’ ITR
  • Previous nine months’ bank statement

While the Pradhan Mantri Mudra Yojana is an incredible initiative, you could face shortcomings with regards to documentation, principal amount limits, etc. while actually applying for one. That’s when a business loan will come in handy.

Bajaj Finserv Business Loan

While you are browsing through scores of business loans in the market, have a look at a loan that is tailor-made for you- the Bajaj Finserv Business Loan, available on Finserv MARKETS. This business loan has an end-to-end online process. You can secure funds of up to Rs. 30 lakhs at attractive interest rates and flexible repayment tenures. It comes with exclusive offerings like tailor-made pre-approved loans. The facility of zero collateral and various value added services like Financial Fitness Report are only an icing on the cake.

Finserv MARKETS, a subsidiary of Bajaj Finserv, is a one-stop digital marketplace that has been created for consumers on the go. It offers 500+ financial and lifestyle products, all at one place. At Finserv MARKETS, we understand that every individual is different. And that’s why we have invested in creating a proposition – Offers You Value. A value proposition that ensures you get offers which are tailor made for you. We also offer an amazing product range and unique set of online offers across Loans, Insurance, Investment, Payments and an exclusive EMI store. Be it in helping you achieve your financial life goals or offering you the latest gadgets, we strive to offer what you are looking for. From simple and fast loan application processes to seamless and hassle-free claim-settlements, from no cost EMIs to 4 hours product delivery, we work towards fulfilling all your personal and financial needs. What’s more! Now enjoy the same benefits in just one click with our Finserv MARKETS App.

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Bajaj Finserv Direct Limited ("BFDL"), erstwhile Bajaj Financial Holdings Limited is a registered corporate agent of Bajaj Allianz Life Insurance Company Limited and Bajaj Allianz General Insurance Company Limited under the IRDAI composite registration number CA0551 valid till 10-Apr-2021. BFDL also renders services to Bajaj Finance Limited (‘BFL’) and Bajaj Housing Finance Limited (‘BHFL’) (referred hereinafter as ‘Lending Partner’) in sourcing of customers, providing preliminary credit support activities, fulfilment services and post-acquisition customer services related to lending business. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522