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All You Need to Know About the Mudra Loan

By Finserv MARKETS - Mar 11,2020
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All You Need to Know About the Mudra Loan
The Pradhan Mantri Mudra Yojna (PMMY) is a scheme launched by the Prime Minister in 2015 to fund income-generating activities of micro and small businesses in the non-farming, non-corporate sector. An acronym for Micro Units Development and Refinance Agency (MUDRA), enterprises can borrow funds up to an amount of ₹10 lakhs under this scheme.

Features of Mudra Loan

  • This is essentially a working capital term loan.
  • It can be used for a variety of purposes, including capacity expansion, modernization, meeting working capital requirements, purchase of plant and machinery, and renovation of business premises, among others.
  • The loan is offered to both new and existing units.
  • The target group of the Pradhan Mantri Mudra Yojana includes businesses involved in manufacturing, trading, or providing services. This is inclusive of allied agricultural activities.
  • The repayment period ranges from 3 years to 5 years.
  • An eligible enterprise can avail the Mudra loan online.
  • The loan margin ranges from 0-10% depending on the amount.
  • The processing fee ranges from 0-0.50% of the loan amount depending on the type of loan.

These characteristics make Mudra Loan one of the best financial products offered by the Government of India.

Products under PMMY

The PMMY scheme has 3 products to offer, namely Shishu, Kishore, and Tarun. Below are the details of these three products.

1. Shishu Loan

Shishu loans under the Mudra scheme allow entrepreneurs on the threshold of starting a business to borrow up to ₹50,000.

Here’s what you need to submit to avail it 

  • Quotation of machinery and other items that need to be purchased
  • Details of plant and machinery purchased
  • Details of the supplier providing the plant and machinery

2. Kishore loan

Kishore loans range from ₹50,001 to ₹5,00,000. They’re ideal for business persons who require additional funds for expanding their trade.

Here’s what you need to submit to avail it 

  • Balance sheet of the business pertaining to the two previous financial years
  • Income tax and sales tax returns
  • Bank account statements for the previous 6 months
  • Estimated balance sheet for the next 1 year or for the duration of the loan sought
  • Memorandum of association and articles of association, if applicable
  • Sales made in the current financial year before applying for the Mudra Loan
  • A report exploring the technical and economic sustainability of the applicant’s business

3.  Tarun loan

Tarun Loan under the PMMY scheme ranges from ₹5,00,001 to ₹10,00,000. Business owners who wish to avail a Tarun Loan need to furnish the following documents, in addition to the details required for applying to Kishore loans.

  • Proof of address
  • Proof of identity
  • Certificate of SC, ST, OBC, as applicable

With the PMMY scheme, you can borrow up to ₹10 lakhs. For more capital or funds or in case you’re ineligible to borrow under the PMMY scheme, get a business loan with Finserv MARKETS. Without providing any collateral, get a loan up to ₹30 lakhs with Finserv MARKETS. The process from application to disbursal is also quick and easy, since there’s minimal documentation involved.

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