Mudra Loan for Startups

In 2022, 107 Indian startups achieved the status of Unicorn Start-Ups. Over the past few years, with the phenomenal growth in startups, the Government of India has introduced a few important initiatives to make it easier to conduct business. One such very popular scheme is the MUDRA loan for startups.

 

Proposed in 2015-16 by the then Finance Minister Shri Arun Jaitley, the Micro Units Development Refinance Agency was introduced by Prime Minister Shri Narendra Modi on April 8, 2015. 

 

A big help for budding entrepreneurs, a Mudra loan for business startups is a great way of fundraising. Read on to learn more about the features, types and how you can apply for a Mudra loan for startups. 

Features of a Startup Mudra loan

The loan scheme was launched to assist micro and small enterprises financially. The features of the Mudra scheme for startups are:

 

• You must be between 18 to 65 years of age to avail of a loan for your startup

• This is an easy loan for traders, shopkeepers, vendors etc. and can be used for various needs

• You can also take a loan for transport vehicles

• There is no need for any collateral/ third-party security

• Entrepreneurs from urban as well as rural areas can benefit from these services

Types of Mudra Loans for New Business

The Pradhan Mantri Mudra Yojana for startups offer loans to small and medium businesses through non-banking financial companies. Depending on Mudra loan eligibility for startups, you can opt for a loan amount of up to ₹10 Lakhs. 

 

Let us take a look at the three types of Mudra loans for a new business:

 

• Shishu - Most suitable for startups in their teething stage, the Shishu Mudra loan amount can go up to ₹50,000. The Shishu loan can help meet the initial capital costs of building infrastructure, setting up the business or purchasing machinery or raw materials.

• Kishore - Post the initial setting-up of your business you need to expand it and help it grow further. The Kishore Mudra loan covers loans between ₹50,000 to ₹5 Lakhs.

• Tarun - Under the Tarun loan scheme, you can get a loan amount between ₹5 Lakhs to ₹10 Lakhs. If you are an established startup, this amount can be very helpful in expanding it further.

Documents Required to Apply for Mudra Loan for Startups

To apply for Mudra Loan for startup businesses, you need certain documents. Here is the list of the documents required to apply for the Pradhan Mantri Mudra Yojana Loan for startups.

 

• Identity Proof - PAN Card or Aadhaar Card or Passport

• Latest passport-size photographs

• Documents of the loan taken (if any)

• Credibility Documents include Educational documents and past bank account statements

• Well-Explained business plan

• Balance Sheet of your business (Only for Kishore and Tarun loans)

• Plan of Future Growth (Only for Kishore and Tarun loans)

How to Apply for Mudra Loan for Startups

Applying for the Mudra scheme for a startup is a simple and straightforward process. To get started, you first need to determine the category that your startup falls under. Then, ensure you understand your business requirements and match them with the criteria mentioned for each loan category.

 

Once you have identified the appropriate category, you can follow these steps to apply for the Mudra Yojana for startups:

 

• Step 1: Visit the official Mudra loan website

• Step 2: Download the Mudra loan application form from the website and fill in all the required details

• Step 3: Once you have filled in the application form, upload all the necessary documents as per the instructions given on the website

• Step 4: After submitting the application and documents, the bank will verify the same. Once your application is approved, the bank will authorise the loan amount and transfer it to your bank account

Utilising Mudra Loans for Startup Business Activities

If you're an entrepreneur looking for funding options for your startup, Mudra loan can be a viable option to explore. The government of India offers these loans through various banks, NBFCs, and MFIs to promote entrepreneurship and small business growth in the country. 

 

Here are some business activities that you can use Mudra loans for:

 

• Small traders and shopkeepers: If you're planning to start a small retail business, such as a grocery store, stationery shop, or a local Kirana store, Mudra loans can help you finance your startup costs.

• Agriculture-based business: If you're planning to start a business in the agricultural sector, such as food processing, poultry, livestock rearing, fishery, or providing auxiliary services, Mudra loans can be a great funding option.

• Textile business: If you're planning to start a business in the textile industry, such as power loom, handloom, printing, or embroidery, Mudra loans can help you finance your business needs.

• Small businesses: If you're planning to start a small business, such as a boutique, beauty parlour, gym, repair shop, medicine shop, or tailor store, Mudra loans can provide you with the necessary funding to start and grow your business.

• Producing and selling food items: If you're planning to start a business in the food industry, such as food stalls, sweet stores, confectioners, or caterers, Mudra loans can help you finance your startup costs and working capital requirements.

Modes of Funding Provided by Pradhan Mantri Mudra Yojana for Startup Funding

If you're starting a new business and need funding, you may want to consider the Pradhan Mantri Mudra Yojana, which provides Mudra loans for startup businesses in India. There are 2 modes of funding available through the program.

 

The first is the Micro Credit Scheme, which offers loans up to ₹1 Lakh through Micro Finance Institutions. Individuals, Joint Liability Groups, and Self-Help Groups can obtain these loans. This is a great option for small businesses that need a modest amount of funding to get started.

 

The second mode of funding is refinancing for banks and NBFCs. This is available for Kishore, Tarun, and Shishu loans and can be accessed through regional rural banks, commercial banks, small finance banks, and NBFCs. Refinancing can be a helpful option for businesses that must finance crucial activities.

 

Mudra loans offer a flexible funding solution for various income-generating activities, including business loans and working capital loans. This is especially beneficial for traders, vendors, and shopkeepers who may require funding to manage their day-to-day business operations. 

 

The Pradhan Mantri Mudra loan has been a valuable resource for many small and medium business owners, supporting new and established entrepreneurs. With its accessible financing options and streamlined application process, the Mudra loan has been instrumental in helping businesses grow and thrive.

 

Consider applying for a Mudra loan if you need funding to take your business to the next level.