The Micro, Small & Medium Enterprises (MSMEs) contribute significantly to the Indian economy. MSMEs also create many job opportunities, thereby reducing unemployment in the country to a certain extent. However, various small and medium scale businesses find it difficult to survive in the competitive market. One of the major obstacles faced by the MSMEs is the lack of sufficient funds for their growth and expansion. To tackle this issue, the Indian Government has come up with various schemes. One such scheme, launched in the year 2015 is the Pradhan Mantri Mudra Yojana (PMMY). Under PMMY, small and medium scale businesses can avail Mudra loans ranging from Rs 50,000 to Rs. 10 lakhs as per their requirement. Micro-Units Development and Refinance Agency (Mudra) is a government established organization that offers funds to small and medium scale businesses in India. The Mudra loan is approved and disbursed by public and private sector banks, NBFCs, small banks, rural banks, scheduled banks, and co-operative societies that are registered under the PMMY scheme. The structure of the Mudra loan is mentioned below:
- Shishu Loans – Rs. 50,000
- Kishor Loans- Rs. 5,00,000
- Tarun Loans – Rs. 10,00,000
Let us have a look at some of the major benefits of availing a Mudra loan.
Benefits of Mudra Loan under PMMY
No Credit Score Check Required
Since Mudra loans are supported by the Government, financial institutions do not check the credit score before approving the loan application. Thus, entrepreneurs can avail a Mudra loan despite their low credit score. This makes it a preferred source of financing for small enterprises that are not eligible for business loans due to their low credit score.
Mudra loans are unsecured loans and hence, entrepreneurs are not required to provide any security while availing the loan amount. Therefore it is ideal for startups that are in their initial phase and do not have sufficient collateral to pledge.
Attractive Interest Rate and No Processing Charges
One of the major benefits of Mudra loan is that it comes with an attractive interest rate. The Mudra loan rate of interest doesn’t go beyond 1% per month and is also dependent upon the base lending rates of the lender. Moreover, Mudra loans do not have processing charges or loan application fees.
The Loan Amount can be used for Various Purposes
The loan amount availed through Mudra loans can be used for a wide variety of business purposes such as business expansion, upgrading infrastructure, purchasing equipment or machinery, meeting working capital needs, etc.
Flexible Repayment Tenure
The repayment tenure of Mudra loan ranges from 3 to 5 years. You can opt for a loan tenure that best suits your needs.
Now that you are well aware of the various benefits of Mudra loans under PMMY. Let us have a look at the eligibility criteria and the application process of Mudra loans:
Eligibility of Mudra Loans under PMMY
- All new as well as existing small and medium scale businesses can apply for a Mudra loan. Small manufacturers, artisans, shopkeepers, and even individuals working at lower levels can apply for a Mudra loan under PMMY.
- To be eligible for the Mudra loan, the applicant should not have defaulted on any type of loan availed in the past by any financial institution.
Steps to Apply for a Mudra Loan
- Step 1: You can apply for a Mudra loan online by visiting the official website of the financial institution with which you wish to avail the Mudra loan
- Step 2: You must fill in the Mudra loan application form by proving your personal and business details
- Step 3: You must provide all the required documents. The basic documents required for availing Mudra loans are Identity proof, address proof, and proof of business.
- Step 4: You must then specify the loan amount and tenure you wish to settle for
- Step 5: After completing the above-mentioned steps, the financial institution will review your application and sanction the loan amount, which will be reflected in your bank account within a short time.
Also read how to apply for MSME Loan advantage provided by the government for revival of the economy
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