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Business Loan - How to Apply for Pradhan Mantri Mudra Yojana – PMMY

By IIFL Home Loans | Published On May 28 2024 10:07 AM 1 min read 38 views 6279 Likes
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The government of India introduced the Pradhan Mantri Mudra Yojana (PMMY) to assist small enterprises throughout India and promote entrepreneurship. The purpose of this PM Mudra Loan program is to give people, particularly micro, small, and medium-sized enterprises (MSMEs), financial support so that they can launch, grow, or improve their businesses.

This is a thorough guide on applying for a business loan under the PMMY scheme, if you're a small business owner or an aspiring entrepreneur needing capital. We will also learn about the Mudra Loan Eligibility Documents and Mudra Loan Details.

Understanding PMMY Mudra Loan Application

The government of India launched the Pradhan Mantri Mudra Yojana (PMMY), a flagship program to give financial assistance to microenterprises that generate revenue other than farming. The program provides three types of business loans by the government, referred to as Mudra loans, which are as follows:

  • Shishu (up to ₹50,000)

  • Kishore (₹50,000 to ₹5,00,000)

  • Tarun (₹5,00,000 to ₹10,00,000)

These loans are offered by various financial organizations, including banks, non-banking financial companies (NBFCs), and microfinance institutions (MFIs), without the need for collateral security or a third-party guarantee.

Mudra Loan Eligibility Criteria

To qualify for a Mudra loan under the PMMY program, a person needs to fulfil the following requirements:

  • The applicant must be a microenterprise involved in trading, manufacturing, or service-related activities.

  • The business shouldn't be classified as an agricultural or related activity.

  • The applicant shouldn't have a history of defaulting on bank or financial institution debts.

  • The loan amount must be used exclusively for business-related needs.

How to apply for small business loans?

Here's how to apply for a government small business loan through the Pradhan Mantri Mudra Yojana:

Step 1. Determine the Type of Loan: Choose a loan that most closely matches your available funds. Shishu is a good choice if you're a first-time entrepreneur or only need a small quantity of funding. You should investigate the Kishore or Tarun categories if you require more funding.

Step 2. Gather the Required Records: Collect the necessary paperwork, such as the company plan, identity and address verification, and other pertinent financial records. The required paperwork could change based on the loan organization.

Step 3. Speak with a Financial Institution Participant: Go to the closest financial institution or bank branch that is a PMMY participant. Additionally, you can apply online using the Mudra portal or the relevant bank's website.

Step 4. Send in a Loan Request: Complete the Mudra loan application provided by the bank or the other lending organisation. Give precise details about your company, the funds you need, and your loan repayment ability.

Step 5. Processing and Approval of the Loan: The bank will evaluate your creditworthiness and eligibility after you submit the application and the necessary paperwork. If your application meets the requirements, it will be approved for a loan in a reasonable amount of time.

Step 6. Loan Amount Disbursement: After your loan is approved, the money will be deposited into your bank account. Make sure you adhere to the lending institution's terms and conditions and use the loan amount for the intended business reasons.

Advantages of Pradhan Mantri Mudra Yojana

Mudra loans under the PMMY plan come with several advantages, such as:

  • Collateral-Free Loans: Mudra loans are available to various entrepreneurs, including those with little assets since they don't require collateral security or a third-party guarantee.

  • Competitive Interest Rates: Mudra loans have competitive interest rates, making them an inexpensive financing option for startups and small enterprises.

  • Flexible Repayment Terms: To accommodate their cash flow needs and business cycles, borrowers can select from various repayment choices, including flexible EMIs.

  • Assistance for Micro-Enterprises: PMMY loans are intended to help micro-enterprises — including women entrepreneurs and underprivileged communities — achieve their business objectives and ambitions.

Wrapping Up

In India, the Pradhan Mantri Mudra Yojana (PMMY) has proven to be a powerful tool for encouraging entrepreneurship and economic expansion. The program enables prospective entrepreneurs and small company owners to fulfil their goals and advance socio-economic growth by giving them access to cheap, collateral-free funding.

IIFL Home Loans is your one-stop solution for home or business loans. For additional information on business loans at reasonable rates, check out the IIFL Home Loans page today!

FAQs

Q1. Can a new firm get a Mudra loan?

Ans:  

Shishu loan offers up to Rs. 50,000 under the Mudra loan plan to business owners either starting a new venture or are in the early stages of their current one. Additionally, the machinery supplier's details must be provided by the borrowers.

Q2. For whom is the PM loan initiative open?

Ans:  

Loans under the PM Mudra lending plan are offered to micro and small, non-farm businesses that generate revenue through trading, manufacturing, and services.

Q3. Does a Mudra loan require CIBIL?

Ans:  

No, a CIBIL score is not necessary to be eligible for a Mudra loan. This government initiative assists individuals in launching or expanding their businesses.

Q4. What happens if the Mudra loan is not repaid?

Ans:  

Lenders are legally allowed to pursue defaulters in the Civil Court to recoup the unpaid balance. This may result in court cases and associated costs for both parties.

Q5. Can we receive a Mudra loan subsidy?

Ans:  

The scheme does not provide any subsidies.

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