Starting a new business can be as risky as it is adventurous, given an array of financial constraints faced by novice entrepreneurs. Lack of assets and turnover also adds to the difficulty to acquire credit. 

The government of India established the Micro Units Development and Refinance Agency (MUDRA) under the Pradhan Mantri Mudra Yojana in April 2015 to address this specific issue. This governing body aims at making working capital easily accessible to small and new businesses via the MUDRA loan. Here is a detailed discourse on how start-ups can enjoy easy access to such financial products.

How to apply for a MUDRA loan in India?

The Reserve Bank of India lists specific financial institutions as eligible to sanction such government-aided funds. Budding entrepreneurs can place a loan request with any one of these to avail of MUDRA loan benefits by following the steps below – 

Step 1: Visit the official MUDRA scheme portal.

Step 2: Click on the loan scheme category you want to apply under to download the loan application form. Fill in all the required fields accurately.

Step 3: Visit the nearest branch of your choice of lender to submit the duly filled-in application form, along with copies of all mandatory documents. Comply with any other lender-specific formalities.

Step 4: Upon successful verification, get funds transferred to your account within 7 to 10 working days.

For individuals wondering which MUDRA scheme can be your best source for a business loan, the following is a brief overview.

Small business loan schemes under PMMY

Depending on their stage of development, micro, small, and medium enterprises are classified into 3 types under the MUDRA scheme.

• Shishu: This is one of the most suitable sources of business finance for start-ups. New business-owners can acquire funds up to Rs.50,000 under this category. Such funds can be used to set up the infrastructure.
• Kishore: Organisations willing to revamp their inventory or increase production can get from Rs.50,000 to Rs.5 lakh under this scheme.
• Tarun: This scheme offers funds above Rs.5 lakh, to a maximum of Rs.10 lakh, to established enterprises willing to expand business operations.

Individuals can gauge their business requirements to apply under any of the above categories. However, before proceeding with the application process, business owners should have a detailed idea of everything they need to know about Pradhan Mantri Mudra Yojana.

What are the eligibility requirements to qualify for a MUDRA loan?

Start-ups complying with the following eligibility criteria can easily acquire funds under the PMMY scheme.

• Age: Applicants must be aged between 18 and 65 years.
• Business type: Must be a non-corporate and non-farm unit in the manufacturing, trading, or services sector.
• Loan requirement: Should not be more than Rs.10 lakh.

Although these parameters might not seem too intimidating, what can be a hassle for many loan-seekers is the documentation process. Applicants need to submit the following documents besides an application form for a successful MUDRA loan application.

• Recent passport-sized photos.
• ID proof.
• Documents for applicants belonging to reserved categories.
• Address proof.
• A credible self-written business plan.
• Proof of business identity.
• Financial documents like bank statements.

Such hard-and-fast requirements might discourage business owners unable to meet all parameters or requiring greater funds from applying. 

Alternatively, one can apply for a business loan from NBFCs like Bajaj Finserv that extend credits of up to Rs.45 lakh with similar benefits. Applicants can also avail additional facilities like pre-approved offers that can expedite the loan application process. These offers are available on business loans, personal loans and such other varied financial products. You can check your pre-approved loan offer by submitting your name and contact details.

Whichever option you pick, do not forget to examine your business requirements thoroughly in advance. Also, follow these tips to responsibly pay off your small business loan to avoid incurring hefty debts in the future.