Micro Units Development & Refinance Agency Ltd. (MUDRA) is an initiative by the Indian Government that supports the micro, small, and medium enterprises (MSMEs) sector by providing them with financial assistance in the form of loans. As per the policy, the MUDRA loans are offered under three schemes: Shishu, Kishor, and Tarun, based on your business’s development stage and financial needs.
However, the process of applying for a Mudra loan might seem daunting for some. Thus, we’ve put together a comprehensive step-by-step guide to help you understand the whole procedure of availing a Mudra loan.
Decide Which Scheme You Are Eligible For
Before you apply for a Mudra loan, it’s essential to understand the three available schemes. The Shishu Mudra loan targets businesses in the inception stage and offers loans up to Rs. 50,000. The Kishor scheme provides loans from Rs. 50,000 to Rs. 5 lakhs to businesses that are well-established but require further funding. Lastly, the Tarun scheme supports established businesses that need up to Rs. 10 lakhs for expansion.
Example: If you are starting a small tailoring business, you might be eligible for the Shishu scheme. Conversely, if you run a mid-sized manufacturing unit and require additional funds for machinery, the Kishor or Tarun scheme would be more appropriate.
Find Your Lending Institution
MUDRA loans are disbursed by several financial institutions, including public and private sector banks, microfinance institutions, and non-banking financial companies. It’s crucial to research and zero in on a lender that offers the most favourable terms like low interest rates, flexible repayment options, minimal processing fees, etc.
Example: Consider approaching a public sector bank like the State Bank of India (SBI) if you prioritise low interest rates. Alternatively, a private sector bank might offer quicker processing times.
Fill Out the Application Form
After determining your eligible scheme and financial institution, proceed by filling up the MUDRA loan application form. This form, available in both online and offline modes, requires you to provide essential details like your personal information, business particulars, loan amount, purpose of the loan, etc.
Detailed Steps:
- Personal Information: Include your name, address, contact details, and PAN number.
- Business Details: Specify your business name, type of business, GST number, and registration details.
- Loan Amount and Purpose: Clearly state the amount you need and how you intend to use it, e.g., for purchasing inventory, equipment, or working capital.
Prepare Your Business Plan
The next step involves submitting a comprehensive business plan. For instance, if applying for the Shishu Mudra loan, your business proposal should detail how you plan to use capital of up to Rs. 50,000. This business scheme assists a lender in figuring out your goals, the possibility of business success, and your repayment capability.
Example: For a catering business applying for a Kishor loan, your business plan should include details about your target market, pricing strategy, marketing plan, and financial projections.
Get Required Documents
Documentation is an integral part of any loan process. For a Mudra loan, you need to submit several documents, including your identity proof, address proof, business-related papers like a registration certificate, GST registration certificate, and passport-size photographs. Make sure these documents are authentic and up-to-date to prevent any loan disapproval.
List of Commonly Required Documents:
- Identity Proof: Aadhaar card, PAN card, Voter ID.
- Address Proof: Utility bill, rental agreement, property tax receipt.
- Business Proof: Registration certificate, GST registration, partnership deed (if applicable).
- Financial Documents: Bank statements, income tax returns, balance sheets.
Submit Your Application
Once your business plan and documents are ready, you can submit your application. If applying offline, you need to visit your selected bank or financial institution and submit your form directly. For online applications, you can fill out the form on the bank’s official website and upload all necessary documents digitally.
Example: If applying offline, ensure you have multiple copies of all documents. For online submissions, ensure your scanned documents are clear and legible.
Loan Approval and Disbursement
After submission, the bank carries out a thorough verification process. They evaluate your documents, business plan, and repayment capacity before approving the loan. Once the loan is approved, the amount is disbursed and credited to your account, enabling you to put your plans into action.
Example: For a small retail shop applying under the Tarun scheme, the bank might verify your sales records and financial statements before approval.
Keep Monitoring Your Repayment Schedule
Once you receive your Mudra loan, remember to keep an eye on your repayment schedule. Repaying your loan as per the agreed schedule is crucial not just for maintaining a good credit score but also for building a trustworthy relationship with your bank.
Example: Set reminders for EMI payments and maintain a buffer amount in your account to avoid missed payments. Regular repayments will also make it easier to apply for future loans.
Benefits of Mudra Loan
- No Collateral Required: Mudra loans are unsecured loans, meaning you don’t need to provide any collateral or security.
- Flexible Repayment Tenure: Depending on the loan scheme and the lender, the repayment tenure can range from 1 to 5 years.
- Reasonable Interest Rates: Interest rates for Mudra loans are generally lower compared to other business loans.
Avail Mudra Loan on Bajaj Finserv App
Looking to start or expand your small business? The Bajaj Finserv App simplifies the process of applying for a Mudra Loan. Designed under the Pradhan Mantri Mudra Yojana (PMMY), this loan offers financial support to micro and small enterprises. Through the Bajaj Finserv App, you can easily check your eligibility, submit necessary documents, and track your loan application in real-time. With competitive interest rates and flexible repayment options, the app ensures a hassle-free experience, allowing you to focus on growing your business without financial worries.
Conclusion
Applying for a Mudra loan is a straightforward procedure if one adheres to a step-by-step approach. This beneficial initiative by the government helps small and micro units finance their business dreams and contributes significantly to the growth of the nation’s overall economy.
Lastly, keep in mind that while the Mudra loan scheme aids in funding your business, whether it’s a Shishu Mudra loan or a Tarun scheme, success largely depends on efficient business management and correct usage of the loan amount. Regularly monitor your business performance and financial health to ensure that the funds are being used effectively and your business is growing as planned.
By following these steps and ensuring that you meet all requirements, you can successfully apply for a Mudra loan and take a significant step towards achieving your business goals.