| Capital is the lifeblood of every business, and without it, core operations would come to a grinding halt. Thankfully, you can access various business loans, and one option is the Mudra loan. Part of the Pradhan Mantri Mudra Yojana (PMMY), it was launched by the Government of India in 2005. The main aim of this initiative is to boost entrepreneurship in the country and provide financial support to businesses. This loan provides numerous attractive benefits, including no requirement to provide collateral and a low Mudra loan interest rate. However, considering these benefits, it is a common assumption that this offering offers subsidies to borrowers. Read on to know more about such provisions and to learn about the different subsidised business loans available. Mudra Loan: Key Facts to Know About it The Mudra loan is a business loan for startups, individuals, MSMEs, self-employed professionals and business owners and comes with various financing solutions. These include overdraft facilities, MSME loans, business loans, and working capital loans. While there is no active Mudra loan subsidy, it offers significantly lower interest rates as compared to other financial institutions. Check out some of the attractive features and benefits of Mudra Loan here. 1. Multiple Loan Amounts The Mudra loan scheme is categorised into 3 schemes, Shishu, Kishore and Tarun schemes. Each scheme offers different loan amounts, with maximum loan amounts up to ₹50,000, ₹5 Lakhs and ₹10 Lakhs. These schemes accommodate a wide range of businesses with different funding needs and sizes. 2. Flexible Repayment Periods The repayment duration for the Mudra loan is up to a maximum tenure of 5 years, which is determined by evaluating the financial standing of your business. Additionally, you have the opportunity of availing refinance from the Mudra scheme for a maximum period of 3 years. You can make the repayments monthly, quarterly, semi-annually and annually. 3. Collateral-Free Loan An attractive benefit of the Mudra scheme is that you do not need to provide collateral as security for securing the loan amount. This allows you to borrow the required funds without risking your valuable personal or business assets. 4. Low Interest Rates Yet another benefit that businesses enjoy with securing funds from the Mudra scheme is that these loans come with appealing interest rates. Mudra loan interest rates are more competitive than interest rates provided by financial institutions, including banks and NBFCs. 5. No Processing and Prepayment Charges With the Mudra loan scheme, businesses do not need to pay any processing fees to get the funds, providing a financially efficient option for businesses, especially MSMEs. Additionally, you can repay the loan earlier than the predetermined repayment date without incurring any prepayment penalties. What are the Different Types of Subsidy Loans for Businesses? Here are the different types of subsidy loans for businesses that you must know about. 1. Stand-Up India Scheme Stand-Up India Scheme is a government initiative that provides financial assistance to small businesses targeting supporting women and SC/ST entrepreneurs. This scheme provides funding from ₹10 Lakhs to ₹1 Crore in areas including trade, manufacturing and agriculture. For non-individual enterprises, women and SC/ST entrepreneurs must hold a minimum of 51% of the company’s shares. 2. Credit-Linked Capital Subsidy Scheme Technology and machinery upgradation are key for sustaining business competitiveness, and these undertakings require adequate funding. The Credit-Linked Capital Subsidy Scheme offers a solution by providing SMEs with funding for technology upgradation. Under this scheme, SMEs can access a subsidy of 15% on institutional finance, up to ₹1 Crore. Businesses can get funding within the approved 51 sectors and products. Also, this scheme includes specific provisions for businesses led by SC/STs and women. This scheme also prioritises regions like Himachal Pradesh, Uttarakhand, Jammu and Kashmir, Lakshadweep and other districts. 3. Prime Minister’s Employment Generation Programme (PMEGP) The scheme aims to create employment in small businesses and boost lending to the micro sector. The eligibility includes being at least 18 years of age with a minimum of 8th-grade education for projects above ₹5 Lakhs in the business or service sector and ₹10 Lakhs in manufacturing. The maximum funding for these industries is ₹10 Lakhs (for business/service sector) and ₹25 Lakhs (for manufacturing sector). Subsidy rates are 15% for urban areas and 25% for rural areas in the general categories. For other categories, the subsidy rates are 25% for urban areas and 35% for rural areas. 4. Subsidiary Through National Small Industries Corporation (NSIC) Subsidiary through National Small Industries Corporation (NSIC) supports MSME growth through technology, finance and marketing services. It operates in 2 schemes for the development of MSMEs. The first is the Credit Support Scheme which offers financial assistance to MSMEs to access raw materials. Another is the Marketing Support Scheme, which supports MSMEs with marketing services. 5. Integrated Processing Development Scheme (IPDS) Integrated Processing Development Scheme (IPDS) offers funding for enhancing technology in the textile industry. It provides support for establishing infrastructure, including machinery expenses and helps address problems in the textile industry. As you can see, the Mudra loan presents itself as an excellent option when seeking financial support for your business. You can get sector-specific business loans with this scheme, and its online application process ensures a hassle-free experience. |
Subsidy Loans for Business: A Comprehensive Overview of Mudra Loan Scheme (S:71)
Chandrakant Joshi
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