INTRODUCTION TO MUDRA LOANS

A prominent scheme of the government of India, the Pradhan Mantri MUDRA Yojana, or PMMY, provides for micro entrepreneurs and small businesses. These loans are specifically to be used for providing accessible and affordable credit to others who cannot easily access the regular bank channels. A Mudra Loan may come as a rather useful financial instrument for entrepreneurs looking to expand a small enterprise or even start up a new one. With Mudra Loans, the expansion of small enterprise entrepreneurs can be funded with cheap loans. With all the right knowledge regarding the eligibility criteria and loan offerings as well as the application process, the chances of getting approved for a Mudra Loan and expanding the business will be excellent.

Eligibility Criteria

Conditions for a Mudra Loan:

To avail a Mudra Loan, your business should meet the following criteria:

• Business Type: The business must fall into one of the following categories which have been classified by the government as micro-enterprises, small enterprises, or medium enterprises.
• Business Age: The age of the firm must be a minimum one year.
• Annual Turnover: The minimum annual turnover maximum limit is based on the type of loan.

Since Mudra Loans do not necessarily demand collateral, firms that are low on assets can definitely go for these. 

Types of Mudra Loans

 Mudra Loans come under three primary categories: 

•  Shishu: Loans of up to Rs. 50,000 fall under this sub-head; 
•  Kishore:  It caters to the small business segment; loans between Rs. 50,000 and Rs. 5 lakh fall          in this category 
•  Tarun: This is for medium-sized businesses that would consider loans beyond Rs. 5 lakh.

How to apply for a mudra loan

1. Getting Mudra Loan is a relatively simple procedure. General steps required are given below:-
2. Selection of Lender: Mudra Loan can be applied through various financial institutes that may be banks, microfinance institutions (MFIs), and non-banking financial companies (NBFCs).
3. Needed Documents: Collect all necessary documents, which may include
4. Identity proof may be PAN card, Adhaar card
5. Evidence of residence (utility bills, ration card)
6. Registration documents of business (includes a certificate of shop establishment and GST registration)
7. Balance sheet, profit and loss account
8. Fill up the Loan Application Form: Fill out the loan application and ensure all financial and business-related details are accurate.
9. Submit: Submit the duly filled up application from the selected lender along with all other necessary documentations.
10. Approval & Disbursal: After scrutinizing your application, the lender will proceed to lend to you. In case approved, it will get credited in your bank account.

Factors That Influence Loan Approval

The following factors may become the reason for the lender to approve or reject your Mudra Loan application:

• Business Plan: How you organize your plan into a solid clear format can make all the difference in getting it approved, especially if it outlines the feasibility and expansion potential of your company
• Credit History: Your credit score and payback may also come into play in the consideration process when considering the viability of your company
• Financial Performance: An analysis of your company’s financials, as presented in your financial reports, will also be considered.
• Collateral: Though Mudra Loans are generally not collateralised sometimes it becomes handy to have.
• Link with Lender: It can be well that there is an established link with the lender, helping

MUDRA Card

MUDRA Card is a RuPay debit card, providing working capital loan in the form of overdraft facility. With the card multiple withdrawal and credit, transactions are allowed, making the transaction digital and thereby helping the borrower’s credit history. The MUDRA card is a product based on the loan account. It can be used for making purchases at any Point of Sale (POS) machine and withdrawing cash at ATMs or micro ATMs dotted all over the country. The borrower is at liberty to repay the loan at any point in time provided he has surplus money.

Conclusion

Mudra Loans have relieved many small business owners in India with a way to the capital they needed to advance. Knowing the qualification requirements, what options are available in loans, and how to apply may increase your chances of getting a Mudra Loan and growing your business to new heights.

Don’t forget to take adequate time in analyzing the needs of your company, select a loan type most appropriate for you, and prepare all your documents beforehand. These can give you the best opportunity to actually reach your full potential as a business and therefore really increase your chance of having an approved loan.