Many micro, small, medium, or large enterprises in India may have the potential to contribute significantly to the economy but are struggling due to low funding. Mudra is an abbreviation for Micro-Units Development and Refinance Agency, a credit-funding scheme that provides financial aid to enterprises through a Loan.

The Indian Government has put in place the Pradhan Mantri Mudra Yojana scheme to help individual entrepreneurs and small and micro businesses to get finance without collateral. You can apply for working capital or a Term Loan in the form of overdraft and cash credit under the MUDRA scheme. It is ideal for those who desire to enter the world of online e-commerce marketplaces and retailers to expand their operations.

Loan categories

The Mudra Loan starts with three categories, Shishu, Kishor, and Tarun. Rs. 50,000 is for the Shishu category where individuals aim to start a business. Rs. 50,000 to Rs. 5 lakh is for the Kishor category consisting of individuals who have started but wish to expand and establish their business. The Tarun category offers Loans between Rs. 5 lakh and Rs. 10 lakh without collateral for established businesses.

Tenures

You can apply for any of the categories according to your income and repayment capacity and business stage. Submit online applications to banks offering the scheme and check your eligibility and affordability. Many tools like the Business Loan calculator assist you in determining the EMI, interest rate, and total amount payable at the end of the five-year tenure.

Using the tool

You can use the Business Loan EMI calculator to estimate how much money you must pay each month on a certain amount. By playing with the figures and Loan duration, you can work out the burden on your cash flow and check whether to apply for a Mudra Loan. Enter the principal amount in the relevant box, the interest rate in percentage, and the tenure in years to calculate the instalment amount.

Purpose of the scheme

The Pradhan Mantri Mudra Yojana aims to fund small-scale companies and lift the entrepreneurial spirit in the country. Other purposes include facilitating shopkeepers, vendors, traders, and other service providers to expand or set up their businesses. It also provides funding for agri-allied non-farm activities creating income, like poultry farming, beekeeping, pisciculture, etc.

Both profitable businesses and non-profits can avail of the Loan. Startups and reward innovation are encouraged with funding at the right time. Mudra Loan interest rates are affordable and can be availed at minimal processing fees. The Government works as the guarantor for the borrower and will bear the responsibility of loss if they cannot repay the bank.