Every business requires funds for growth, expansion, and development. It is easy for large-scale business organizations to enhance their profit margins and use them for further investment in the business. Still, it becomes difficult for small, micro, and medium enterprises to increase their profit margins frequently. Numerous entrepreneurs with small, micro or medium units do not have access to formal borrowing channels, and MUDRA is the best option to avail of a loan. The MUDRA stands for Micro Units Development and Refinance Agency, launched under the Pradhan Mantri MUDRA Yojana by respected PM Narendra Modi on 8th April 2015. The scheme ensures that small businesses get refined financial support from banks, private sector and urban cooperative banks, regional rural and microfinance institutes, as well as, non-finance companies. Mudra loan Eligibility criterion says that the business should at least have a minimum of two lakh monthly sales and a minimum business vintage of a year.
The MUDRA loan schemes mainly offer credit facilities to MSMEs engaged in manufacturing, trading, and service sector activities. The amount starts from Rs. 50,000 and goes up to Rs. 10 lakh for new start-up enterprises. MSME loan for new business is an unsecured type of business loan where the businessman does need to pledge their collateral with the money lender. Enterprises can use the loans for term loans, overdraft facilities, or even apply for letters of credit and bank guarantees. This scheme is an entirely-owned subsidiary of SIDBI primarily aimed at providing services to MSME units across the country.
There are many benefits of getting MUDRA, and some of them are as follows: –
- High Amount – the scheme lends a minimum of Rs. 50,000 and goes up to lending Rs 10 lakh for setting up new firms, and for already established units, it provides a maximum loan of Rs. 10 Lakh, which is to be repaid within the tenure of 5 years. Also, the loan is offered in different categories, such as invoice financing, working capital loan, line of credit, and merchant cash advance.
- No Collateral – usually, whenever the loan is lent, the lender demands security or collateral be kept with him for the tenure of repayment. Still, unlike other loans, the MUDRA loans do not require any security or collateral by the businessman for a lending loan. Thus the scheme is an unsecured type of business loan.
- Beneficial for SMEs – small and medium enterprises have a vital role to play in the Indian economy, as this sector provides incredible employment opportunities, especially in rural areas, which is why the sector is called the Sunshine sector of the Indian economy. Also, here the government is the credit guarantee for the borrower, meaning that if the borrower fails to pay off the loan, then the government bears the loan’s responsibility.
- Multipurpose Loans – the scheme offers multi purposes loans for the enterprises’ growth and development. Vendors and shopkeepers are provided working capital loans, equipment financing for micro-units, and transport vehicle loans. Also, people in business can avail of business loans for small amounts at nominal interest rates from legitimate lenders under this scheme.
- Easy and Affordable –applying for and getting the loan is pretty straightforward. The growth of this very potent sector remained stunted due to a lack of access to capital. The borrower requires Personal KYC, Residential Address Proof, Business KYC, and Bank statements of the last six months from the current account to complete the process and get the loan.
Thus, getting a loan under the MUDRA scheme will benefit MSME entrepreneurs and contribute to the development of the sector and the economy as a whole.