Know the Differences Between Mudra Loan and Business Loan

Mudra Loan Vs Business Loan

Check the comparison between mudra loan and business loan

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In today's highly competitive world, each organisation aspires to grow or expand its business on a large scale to stand out in the market. But, to do so, a large amount of funding is required and it can be obtained easily through a loan. Several financial institutions are available whom you can approach for a loan but before that, you must be aware of the type of loan that will match your demands.

Usually, people get confused between MUDRA Loan vs Business Loan since both credits are for business persons. Even though both products have a similar objective, both have different eligibility criteria, interest rates, etc.

To know more, let’s understand both products so that you can choose the best option.

MUDRA Loan Vs Business Loan Comparison

Here is the table that will help you to understand the key differences between MUDRA Loan vs Business Loan.

 

MUDRA Loan

Business Loan

Meaning

MUDRA is an acronym that stands for Micro Units Development & Refinance Agency Ltd. It was established to assist small company owners in growing their businesses by providing loans.

This loan can be obtained from any financial institution to expand an existing business, start a new one, purchase new tools and types of machinery or clear outstanding business dues.

Origin

This scheme was introduced by the Indian government.

Business Loans are provided by different banking institutions and NBFCs.

Maximum Loan Amount

You can get upto Rs. 10 Lakhs

The maximum amount varies across lenders.

Interest Rate

The starting interest rate is 8%.

The rate of interest for a Business Loan is different from lender to lender.

Mode of Applying

You can apply for this loan through online mode or by visiting any financial institution’s branch.

You may apply for this loan online or in person at any financial institution's branch.

Collateral

No collateral is required

Collateral is required

Comparison of Eligibility Criteria for MUDRA Loan & Business Loan

The eligibility criteria for both loans are different. Below are the details about the same.

MUDRA Loan

  • The minimum age of the applicant must be 18 and the maximum should be 65 years.

  • Only small/micro-firms such as fruit and vegetable vendors, artisans, shopkeepers, beauty salons, tailoring shops, courier services, boutiques, etc are eligible to apply for mudra loan.

Business Loan

  • The minimum age of the applicant must be 21 and the maximum should be 65 years.

  • Any business can apply for this loan.

  • Business vintage (minimum two years).

  • ITR of last year should be a minimum of Rs. 1.5 Lakhs.

  • The company’s annual turnover must be more than Rs. 10 Lakhs.

  • The home and the workplace should be distinct.

  • The proprietor of the business should own either a residence or the business site.

The eligibility criteria of a Business Loan may vary from lender to lender.

Comparison of Documents Required for MUDRA Loan & Business Loan

Here is the list of required documents for MUDRA and Business Loans.

MUDRA Loan

  • Identity proof (Aadhaar card, PAN card, Voter Id card, Passport, Bank passbook, driving licence)

  • Address proof (Aadhaar card, Passport, Voter Id card, Utility bills)

  • Income proof (Bank account statements from the previous six months, income tax returns/sales tax returns, balance sheets from the previous three years audited by CA, and forecasted balance sheets for the upcoming two years)

  • Caste certificate (if you belong to a reserved caste)

  • Business address proof (Business registration certificate, documents containing the business's owners' information and address)

  • Rental agreement (if it is established on a rented property)

  • Partnership contract (if you have any partner)

  • Memorandum and articles of association (if the business is a corporation)

  • Title agreement

  • Lease deed

  • Inventory purchase certificate (if you are taking out the loan to expand your firm)

  • Passport size photographs

  • Small scale industry registration (SSI) certificate

  • Clearance certificate from pollution board

Business Loan

  • Identity proof (Aadhaar card, Voter Id card, Passport, Bank passbook, driving licence)

  • Address proof (Aadhaar card, Passport, Voter Id card, Utility bills)

  • PAN card

  • Age proof

  • Business residence proof (Business registration certificate, documents containing the business's owners' information and address)

  • Bank statement for past six months

  • ITS for last two years

  • Balance sheets for last two years audited by CA

  • Passport size photographs

Conclusion

Both loan types have their own set of advantages, eligibility criteria, and documentation. With the assistance of the above comparison, you now know the differences between MUDRA Loan and Business Loan. As a result, it will assist you in making an informed selection and selecting the best alternative for your needs.