Swayamsiddha Foundation

Mudra Yojana is a loan scheme initiated by the Government of India to offer business loans of amount up to Rs. 10 lakh at competitive interest rates to individuals, MSMEs and self-employed professionals. No collateral or security is required by any financial institution from the borrowers applying for Mudra loan. The maximum repayment tenure offered under Mudra Yojana is up to 5 years with Nil to nominal processing fees.

Micro Units Development and Refinance Agency (MUDRA) Loan scheme under Pradhan Mantri Mudra Yojana (PMMY) is an initiative by the Government of India that offers loans to individuals and MSMEs with the help of banks and NBFCs. Collateral-free business loans offered under MUDRA Yojana come in three loan categories, named Shishu, Kishor, and Tarun.

Features of Mudra Loan

Nature of Loan	Term Loan, Working Capital and Overdraft
Types of Mudra Schemes	Shishu, Kishor, and Tarun
Loan Amount	Under Shishu Scheme: Up to Rs. 50,000Under Kishor Scheme: Rs. 50,001 – Rs. 5,00,000Under Tarun Scheme: Rs. 5,00,001 – Rs. 10,00,000
Interest Rates	As per the applicant’s profile and business requirements
Processing Charges	Nil, or 0.50% of the sanctioned loan amount
Collateral/Security	Not required by Banks/NBFCs
Repayment Tenure	From 12 months to 5 years
Foreclosure Charges	Nil

Eligible Entities

Loans under Mudra scheme can be availed by individuals, startups, shopkeepers, street vendors, retailers, traders, small manufacturers, artisans, and MSMEs. Mudra Loan can also be availed by Sole Proprietorships, Partnership firms, and Limited Liability Partnerships (LLPs) engaged only in the services, manufacturing, and trading sectors.

Benefits of Mudra Loan

• Collateral-free loans – No collateral or security is required by the banks/NBFCs form the borrower
• Low-interest rates with even Nil to nominal processing fees
• Concessional interest rates for women entrepreneurs
• Loans covered under Credit Guarantee Schemes from Govt. of India
• Can be used as Term loans, Working capital loans, and Overdraft facilities
• All Non-farm enterprises, i.e. Small or Micro firms engaged in income-generating activities can avail Mudra loans
• Mudra loans can also be availed by people belonging to SC/ ST/ Minority category at special interest rates

How to Apply 

The application form is available at mudra.org.in, so you can download the form and fill in all the required details. Different banks may have slightly different application procedures. You must visit the nearest branch of the desired bank from where you want to get the Mudra loan and submit the duly filled application form and complete the bank formalities.

Secondly, you can also apply online on the bank’s official website by submitting the duly filled application form along with the required documents as specified by the lender. Once the lender is satisfied with the submitted documents, then shall approve the loan and you may receive the loan amount in your mentioned bank account within a few working days.

Documents required

• Duly filled application with passport-sized photographs
• KYC documents of Applicant and Co-applicants: Passport, Voter’s ID card, Aadhar Card, Driving License, PAN card, Utility Bills (Water/Electricity Bills)
• Proof of belonging to a special category, such as SC/ ST/ OBC/ Minority, etc. (if applicable)
• Last 6 months’ bank statement
• Business address and tenure proof, if applicable
• Any other documents required by the bank or NBFC

Note: The Mudra loan application form to be filled and submitted is separate in the case of Shishu, whereas similar in the case of Kishor and Tarun loan schemes.

List of Businesses covered under Mudra Scheme

List of businesses that are covered under the Mudra scheme to perform income-generating activities is mentioned below:

• Commercial Vehicle: Mudra finance for machinery and equipment can be used to purchase commercial transport vehicles like tractors, auto-rickshaws, taxis, trollies, tillers, goods transports vehicles, 3-wheelers, e-rickshaws, etc.
• Service Sector Activities: Starting businesses of salons, gyms, tailoring shops, medical shops, repair shops, and dry cleaning and photocopying shops, etc.
• Food and Textile Product Sector Activities: Various activities involved in the respective sector, such as papad, achaar, ice cream, biscuits, jam, jelly, and sweets making, as well as for agriculture produce preservation at rural level
• Business activities for Traders and Shopkeepers: Setting up shops, service enterprises, trading and business activities, and non-farm income-generating activities
• Equipment Finance Scheme for Micro Units: Maximum loan up to Rs. 10 lakh
• Agri-allied Activities: Activities related to businesses in agri-clinics and agribusiness centers, food & agro-processing units, poultry farming, pisciculture, beekeeping, sorting, livestock-rearing, grading, aggregation agro-industries, dairy, fishery, etc.

Mudra Loans for Women Entrepreneurs

Mudra Yojana under PMMY encourages women entrepreneurship and for that private and public sector banks, NBFCs & Micro Finance Institutions (MFIs) offer collateral-free business loans at reduced or concessional interest rates for women entrepreneurs. The maximum loan amount offered under Mudra Yojana for women entrepreneurs is up to Rs. 10 lakh with repayment tenure of up to 5 years. The Mudra loan eligibility for women remains the same, as stated for individuals and enterprises. Nil to nominal processing fee is charged on the sanctioned loan amount for women entrepreneurs.

MUDRA Card

Mudra card is a type of debit card that is issued to the borrowers of Mudra loans to meet their business and working capital requirements. After Mudra loan approval, the lender opens a Mudra loan account for the borrower and issues a debit card along with it. The loan amount is disbursed in the bank account and further can be withdrawn from the total sanctioned amount in portions by borrowers, as per their business requirements.

Official Website

Source

Business, be it big or small, is most of the times in need of additional funds to meet day-to-day business requirements. The required funding also depends upon the nature of the business – is it capital-intensive and what is its stage of development, in terms of inception, growth or maturity? Usually businesses need funds the most in the initial stages and for growth perspectives. In this piece of article, we shall discuss almost all the types of business loans that are sanctioned by financial institutions in India.

Broadly there are 8 Types of Business Loans in India:

• Working Capital Loan
• Term Loan (Short & Long-term Loan)
• Letter of Credit
• Bill/Invoice Discounting
• Overdraft Facility
• Equipment Finance or Machinery Loan
• Loans under Govt. schemes
• POS Loans or Merchant Cash Advance

1) Working Capital Loan

Working capital loans are used by enterprises to meet their daily business requirements, such as buying machinery/equipment, managing business cash flow, purchasing raw materials, enhancing inventory, paying salaries, etc. Working capital loans are majorly short-term loans in which the repayment tenure is up to 12 months. This loan is also termed a collateral-free loan in which the borrower is not required to submit any collateral or security with the bank. The interest rate offered is bit higher as compared to long-term loans or general business loans. In this type of loan, the bank sets a limit for the business to take a loan and the amount can be utilized for specific business purposes, only.

2) Term Loan

Term loan is a loan that is required to be repaid in regular payments over a set period of time. The term loan is categorized into short-term and long-term loans. The repayment tenure of these two types ranges between 12 months to 5 years. Term loans that are of a shorter duration which is of 12 months are called short-term loans and loans up to 10 years are long-term loans. The loan amount offered by the bank ranges from Rs. 30,000 to Rs. 1 crore, can even exceed depending upon business requirements. The repayment tenure for a term loan is finalized by the lender at the time of loan application.

3) Letter of Credit

Letter of credit is a type of credit limit used majorly in trading businesses in which the bank or lender provides funding guarantee to enterprises that deal in international trade. Letter of credit can be utilized for both import and export purposes by entrepreneurs. Enterprises doing businesses overseas tend to deal with some unknown suppliers, so for that they require assurance of payment before performing any transaction. Therefore, letter of credit plays a vital role in providing payment assurance to the suppliers.

4) Bill Discounting

Bill or Invoice Discounting is a funding facility in which the seller gets an amount in advance at discounted rates from the lender. This asks buyers to contribute in the form of interest rate in increasing the revenue of the financial institutions, in form of interest paid and from monthly fee. For example, You have sold goods to Mr. Singh, he has given you letter of credit from the bank of 45 days, if you want to get money from the bank before 45 days, the bank will charge some interest rate from you, which in return will be called a discount for the seller. Further, let’s assume if the amount which you were supposed to get was Rs. 10 lakh on or after 45 days, by bank’s discount or interest rate of Rs. 50,000 you now get Rs. 9,50,000 in return form the bank. The buyer will anyhow deposit Rs. 10 lakh to the respective bank on 45th day only.

5) Overdraft Loan

Overdraft facility is a funding type offered by a bank to its account holder to withdraw cash from his/her account even if the account balance is zero. The interest rate is charged only on the utilized amount from the sanctioned limit and on a daily basis. The credit limit that is sanctioned depends upon the account holder’s relationship with the bank, credit history, cash flows and repayment history, if any. The overdraft limit is revised every year and can be used in any manner, if the interest is paid on time. Overdraft facility is offered against collateral or securities, especially in terms of FDs with the bank.

6) Equipment Finance

The equipment finance or machinery loan is a funding option offered to the borrowers for them to purchase new equipment/machinery or to upgrade the existing. Equipment finance is used mainly by large enterprises and enterprises engaged in the manufacturing sector. Enterprises or business owners availing equipment loans also enjoy tax benefits. The interest rate, loan amount and repayment tenure offered shall vary from lender to lender.

7) Loans under Govt. Schemes

The Government of India has initiated various loan schemes to promote individuals, MSMEs, women entrepreneurs and other entities engaged in trading, services and manufacturing sectors. The loans under government schemes are offered by various financial institutions, such as private and public sector banks, NBFCs, Regional Rural Banks (RRBs), Micro Finance Institutions (MFIs), Small Finance Banks (SFBs), etc. Some of the leading Govt. Loan schemes include Mudra Scheme under PMMY, PMEGP, CGTMSE, Standup India, Startup India, PSB Loans in 59 minutes, etc.

8) Point-of-Sale (POS) Loans

POS Loans or Merchant Cash Advance is a mechanism in which a business owner running an enterprise pays a lump sum amount in advance to suppliers via his/her daily or future credit or debit card transactions. Several times, merchants of SMEs experience a short-term cash crunch. Hence, to reduce the liquidity crunch in the business, merchants opt for POS loans. The interest rate offered under POS loans is comparatively higher, as compared to other business loan types. The repayment facility is linked with debit or credit transactions Point of Sales (POS) machines installed at retail shops, grocery stores, supermarkets, and shopping malls.

As of now, you must have got a rough idea about the types of business loans offered by lending institutions in India. Business loans can be availed at nominal and attractive interest rates with flexible and easy EMIs. The best business loan deal can be picked by comparing various loan deals offered by leading private and public sector banks, NBFCs, Regional Rural Banks, Small Finance Banks, Micro Finance Institutions and various other financial entities.

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With the objective to encourage women entrepreneurs and give impetus to their business journey, the Ministry of Social Justice and Empowerment, the Government of India has implemented a strategic policy – Mahila Samridhi Yojana. Under the visionary scheme, the government provides microfinance to women entrepreneurs hailing from marginalized sections of the society – backward classes. Designed considering women’s empowerment, the flagship scheme is being implemented by a wide range of channel partners nationwide. Targeted women beneficiaries are identified and given loans either directly or in the form of Self-Help Groups (SHGs).

The guidelines under the Mahila Samridhi Yojana (MSY) clearly signify that the loan to the tune of 95% will be sanctioned, while the balance 5% will be funded by the State Channelizing Agencies (SCAs) or beneficiary contribution. Guidelines indicate that the utilization period for the loan received is 4 months, starting from the date of disbursement of the loan.

Limit of Loan	Interest Chargeable
Rs. 1,40,000 per beneficiary	SCA	Beneficiary
1% per annum	4% per annum

Loan Repayment Tenure: 3 years and 6 months

Moratorium Period: 3 months

Eligibility

As the MSY scheme is dedicated to bringing about a turnaround in the lives of women belonging to the marginalized sections of the society, stringent eligibility criteria is in place to ensure fair disbursal of the loan. The eligibility criteria comprise:

• SHGs and women entrepreneur from backward sections of the society are only eligible to draw the benefit of MSY loan
• Woman beneficiary of the minimum age of 18 years
• Beneficiary falling under the BPL category
• Annual income of the beneficiary should be less Rs. 3 lakh per annum
• No criminal past record

Any kind of misrepresentation or fudging of data might lead to the rejection of an application.

Documents Required

The MSY loan has been receiving an overwhelming response from the women hailing from every nook and corner of the country. There are plenty of reasons to corroborate the fact, minimal documentation is one among them. The following documents are required to avail the loan facility intended to empower women and lift their socio-economic status:

• Proof of Identity – Voter ID card
• Self-group membership ID card
• Income certificate issued by the competent authority
• Filled in the application form to obtain the Mahila Samridhi Yojna loan
• Aadhaar card
• Caste certificate issued by the competent authority
• Bank account book
• Passport size photograph
• Proof of residence (Electricity bill or ration card can be furnished)

As the MSY loan is intended for the backward sections, it has come to light, a substantial number of women beneficiaries have lifted their socio-economic status.

Features & Benefits

The flagship scheme of the Ministry of Social Justice and Empowerment, the Government of India has been instrumental in transforming the lives of hundreds of women across India. Some of the benefits include:

• Lifts the socio-economic condition of the beneficiary
• Plays a role in mainstreaming of the poverty-ridden family
• Supports in generating employment opportunities
• Cultivates entrepreneurship among women
• Empowers the women, make them self-reliant
• Minimal documentation
• Raises the self-belief in women

Other Significant Information

Self Help Groups (SHGs): Economically aligned group of people who voluntarily develop a group to raise their income by saving and contributing to group activities.

Channel Partners: Channel partners are represented by competent professionals in the field; help the group and its members in economic activities and in availing the MSY loan.

Member Ration: As per the rules and regulations, maximum women members allowed in an SHG are – 20. The 75% of members should be from the backward classes as mandated by the eligibility criteria, while the remaining 25% of women members could be from other weaker sections – Scheduled Caste or physically handicapped.

Loan Disbursal: Loan is disbursed through the State Channelizing Agencies (SCAs), Regional Rural Banks (RRBs) and the nationalized banks to the beneficiaries.

Mahila Udyam Nidhi (MUN) Scheme is a scheme offered under the Small Industrial Development Bank of India (SIDBI) to encourage and empower women entrepreneurs and promote women Entrepreneurship by providing financial assistance at concessional interest rates. The funding provided by Mahila Udyam Nidhi Scheme can be used by MSMEs to undertake service, manufacturing and production-related activities.

Under Mahila Udyam Nidhi Scheme, women entrepreneurs can avail loans up to Rs. 10 lakh to start their own business or small scale enterprise. The interest rates offered under this scheme may vary from bank to bank. The funding support can also be used to upgrade or expand existing projects. The maximum loan repayment period offered under this scheme is up to 10 years with the moratorium pages up to 5 years.

Eligibility Criteria
Women entrepreneurs who have initiated existing and new MSMEs, Tiny Units or SSIs Financial holding of women entrepreneurs should not be less than 51%, engaged in manufacturing and production purposes Existing or new MSMEs engaged only in services, trading and manufacturing sectors MSMEs or tiny enterprises with a minimum investment of at least Rs. 5 lakh MSMEs engaged in various activities, such as business expansion, improvement, diversification, and technology upgradation.

Features of Project Profile

• Project cost must not exceed Rs. 10 lakh
• Loan limit of up to 25% of project cost, subject to a maximum of Rs. 2.5 lakh per project is offered to deserving women entrepreneurs
• Repayment tenure of the loan is up to 10 years, including a moratorium period of 5 years
• Interest rates fixed by SIDBI and offered by banks may vary from time to time and shall be communicated by SIDBI to women entrepreneurs
• Service charge of 1% per annum is charged by the respective bank, as per the sanctioned loan
• Service charge waiver depends on the lending office

Benefits of Mahila Udyog Nidhi Yojana

• Promotes women entrepreneurs
• Increases employment opportunities in the tiny and small scale sectors
• Helps to meet the gap in equity
• Rehabilitates weak SSI units
• Expansion, modernization and technology upgradation of service industries

Activities included in Mahila Udyam Nidhi Scheme are as follows:

• Auto-repairing and servicing centre
• Beauty parlour
• Cable TV Network
• Canteen and Restaurant
• Computerized Desktop publishing
• Crèche
• Cyber Café
• Daycare centre
• ISD / STD Booth
• Laundry & Dry Cleaning
• Mobile Repairing
• Photocopying (Xerox) Centre
• Purchase of auto-rickshaws, two-wheelers, cars
• TV Repairing
• Road transport operator
• Salon
• Servicing of Agricultural and Farm equipment
• Tailoring
• Training Institute
• Typing Centre
• Washing machines and other electronic and electrical gadgets, etc.

Mahila Udyam Nidhi Scheme was first launched by Punjab National Bank to provide funding support to women entrepreneurs who are engaged in SSIs. However, there are several banks that offer Mahila Udyam Nidhi Scheme at affordable and attractive interest rates. Moreover, there is no collateral or security to be submitted by the women entrepreneurs to start their enterprise. This scheme helps women entrepreneurs to start their own businesses and promotes them to grow and expand in their areas of interest and skills.

Like Mahila Udyam Nidhi Scheme, there are various other schemes that promote and help in the development and growth of women entrepreneurship that include Mudra loan scheme, TREAD (Trade-Related Entrepreneurship Assistance and Development) scheme, Cent Kalyani Scheme, Udyogini Scheme, Dena Shakti Scheme, Annapurna Scheme, Stree Shakti Package for Women Entrepreneurs, etc.

For taking a business loan from the bank for a new start-up business, the borrower must represent the project report of their business. All the necessary requirements and official documents have to be submitted with the project report. The project report should be such that it should represent the idea of the whole business and can be easily understood by the reader.

Elements of Project Report

Let’s discuss the standard format for the project report for bank loans of new businesses.

Introductory page

• On this page, the introduction of your new business is to be given
• The aim of the business and on what purpose you have chosen this business all these points should be mentioned in this introductory part

Summary of the project

• Summary of the project should consist of the overall status of the business
• Time to be consumed in working or manufacturing something should be there
• The budget of the whole business should also be mentioned

Scope of the project

• Scope of your business should be clearly described
• It should contain the percentage of work that you planned and the percentage of planned work that has already been completed
• Quick overview of results and planning of next steps should be included

Details of Promoters

• The promoters are the mediator for the business which helps for the promotion of the business
• The details of the promoters and their educational qualifications and work experiences etc. should also be given in the report

Details of Employees

• The details about the employees working this business should be written
• Their educational qualifications should also be mentioned
• The work experiences and details about the top management should also be written

Infrastructure Facilities

• Information about infrastructure facilities should also be mentioned like whether the tools have been deployed or not
• Also, write about the conditions of the operational premises and what all are used
• Types of machinery used in the business should also be mentioned

Customer Details

• Information about customers should be well written like, what are the types of customers you have targeted for selling your business items
• The prospective customer’s details should also be mentioned like is they from the big organization and also what is their capacity of buying goods in this business

Regional Operations

• Many times a company opens branches in different areas or regions. The branches may be set up nationally and internationally, as per the requirements
• When you make a project report you have to write about the different setups you made in which region and also write about the operation teams
  

Fiscal Acquisitions and Tie-ups

• You have to write it down in the project report with whom you have done tie-up or which stock or acquisition you have taken and all details of it should be mentioned in the report

Means of Financing

• The financing in the business can be done by the financial corporation or the business partners or somewhere else
• So, it is very important that from where the funding is coming, so this all should be mentioned in the report

Balance Sheets

• Balance sheets tell about where the money has been spent
• Also in what areas and fields the spending has been done is also noted. Thus all the accounts of the business will be seen in this balance sheet
• It is important to show the balance sheets of your company to the bank and it should also be mentioned in the report

Profit and Loss Statements

• How much the profit will company make and how much profit is making the business has to be in the report
• Whether the business is making any profit or loss the statements should be shown to the bank and also being mentioned in the report

Fund Flow Statement

• The funding given by any corporate or government and where it is used and in what fields of business the funding is flowing should be mentioned in the project report

Break-Even Points Evaluations

• Give the evaluations of the whole project report in even points and mention everything about your whole business
• Project Feasibility Ratio: Deciding on the ratio of cost, discounts, and revenue

Project Feasibility Ratio

Project Feasibility Ratio is basically deciding on the ratio of cost, discounts, and revenue of an enterprise. It can be presented in the form of a graph by mentioning the year-on-year comparison between revenue and expense. The project report should also contain the expense split-up graph.

The components of Project Feasibility Ratio are below mentioned that are required to be displayed as per year-on-year comparison:

• Current ratio
• Quick ratio
• Interest coverage ratio
• Debt equity ratio
• Gross profit Sales Percentage
• Net profit Sales Percentage
• Return On Capital Employed

Scope of the project

The scope of the project should have below mentioned details:

• Promoter(s) details
• Product / services & process
• Plant & machinery / equipment
• Market potential & Strategy
• Manpower requirements
• Risks & Mitigation strategy

FAQs

Ques. Is it necessary to make a project report for a bank loan?

Ans. The project report is very much necessary when you’re going to take a business loan for your business.

Ques. What are the necessary contents used in the project report?

Ans. The necessary contents preparing in project reports are:

• Introductory page
• Summary
• Details about the promoters
• Details of employees
• Details about Infrastructure
• Details about customer
• Regional operations
• Fiscal acquisitions and tie-ups
• Means of financing
• Balance sheet
• Profit and loss statements
• Fund flow statements
• Break-even point evaluations
• Conclusion

Source

Objective
Technology up-gradation and expansion of existing units through credit support

Key Benefits
To fulfill the need of additional financial assistance for upgradation and expansion of successful/well performing existing units
Maximum subsidy would be 15% of the project cost (20% for NER and Hill States). The balance amount of the total project cost is provided by Banks as term loan.

Scheme applicable for
Existing well performing PMEGP/MUDRA units

Detailed Information
Further financial assistance scheme for expansion/upgrade the existing PMEGP/MUDRA units for manufacturing and Service/Trading units from the year 2018-19
The maximum cost of the project under manufacturing sector for up-gradation is Rs.1.00 crore and Rs.25.00 lakh under Service/Trading sector.
Maximum subsidy would be 15% of the project cost (20% for NER and Hill States) i.e. Rs. 15.00 lakh in Non-NER and Rs. 20.00 Lakh for NER and Hill States. The balance amount of the total project cost are provided by Banks as term loan.
All existing units financed under PMEGP/MUDRA schemes running successfully whose Margin Money claim has been adjusted and the First loan (only CE) availed should have been repaid in stipulated time and WC may be exempted.
The units should have been making profit for the last three years.
Beneficiary may apply to the same financing bank, which sanctioned the loan for their unit, or to any other financing bank, which is willing to extend credit facility for second loan.
The beneficiary can choose any implementing agency and that may be different from the agency chosen for 1st loan.
Registration of Udyog Aadhar Memorandum (UAM) is mandatory.
The 2nd loan should lead to additional employment generation.
On PMEGP e-Portal, a separate application link provided to submit the application under 2nd loan for up-gradation.

How to apply Click Here