Author: Ashish James

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Types of Working Capital Loan

Types of Working Capital Loan

There are different types of working capital financing available in the Indian market. As a result, applicants can choose from  Cash credit/Bank overdraft, trade credit, bank guarantee,  invoice factoring, and letter of credit.

Inadequate working capital can also result in non-payment of certain dues on time. Improper type of funding would cause loss of interest which directly hits the profits of the business.

What are the Different Types of Working Capital Loans?

The following are the types of working capital loans:

Cash Credit/Bank Overdraft

Small and large businesses use cash credit or bank overdraft forms of working capital financing mainly. The commercial banks approve a certain amount to the borrower that he can use for making his business payments. The borrower has to make sure not to exceed the limit of the cash approved. Moreover, the interest is charged to the extent the money is withdrawn and not the approved amount This encourages the borrower to keep depositing the amount when possible to save on interest rate. 

Trade Credit

Potential or present suppliers provide trade credit as a type of working capital financing. Suppliers offer a trade credit when you place a bulk order with them. Based on their creditworthiness, which is determined by their profit records, liquidity situation, and payment records, businesses receive this offer. However, the supplier will also thoroughly evaluate your business credit history before offering you money.

Bank Guarantee

This is a non-fund-based working capital financing. The client or seller acquires a bank guarantee to minimize the risk of loss to the other party resulting from the non-performance of a specific agreement. It could be anything from a payment to the promise of service. The holder only repeals it on non-performance by the other party. The bank asks for some security or charges some commission.

Letter of Credit

The buyer can purchase a letter of credit from a lender. Then, a buyer would purchase a letter of credit and send it to the seller. After the agreed order is sent by the sender; the lender will pay the seller the cost of the order. The bank would pay the amount to the seller and collect that cash from the buyer. 

 Invoice Factoring 

Factoring is an arrangement where a business sells either all or a particular of its invoices to a third party. As a result, the factoring company will pay you most of the invoiced amount immediately. This is done at a lower value than the original value of the accounts. The ‘factor’ is the third party that offers factoring services to businesses. The factor also collects the amount from the debtors.

Also Read: Benefits of Working Capital Loan
What are the Eligibility Criteria for Working Capital Loan?
  • Age Criteria: Min. 18 years & Max. 65 years
  • Business Year, Annual Turnover, and work experience to be determined by the lender
  • Good CIBIL score and repayment history
  • No previous loan default with any financial institution
  • An Indian citizen with no criminal history

Lenders largely offer Working Capital Loans to SMEs, MSMEs, Sole Proprietorship Firms, Partnerships, and Private and Public Limited Companies.

What are the Documents Required for a Working Capital Loan?
  • Duly filled application form with passport-sized photographs
  • Self-written business plan/project report
  • KYC documents of applicant and co-applicants that include Passport, Aadhar card, Voter’s ID card, Driving License, PAN Card, and Utility Bills (Telephone, Electricity)
  • Last 1 years’ bank statement
  • Partnership deed, if applicable
  • Certificate of registration and incorporation
  • Any other document required by the lender
About Finline!

Finline is an online platform for creating financial reports for getting bank loans and investments. It’s like ‘Canva’ but for financials. If you are an entrepreneur looking for a bank loan, you need to have a well-crafted project report. We, at Finline will help you with that. Our team will help you create a powerful business plan in ten minutes. That too in your language. All public and private sector banks working in India accept our project report. Click to create your report.

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Working Capital Loan

Working Capital Loan is a type of short-term loan availed by firms for their daily operational expenses. They support the businesses to become more focused on their growth and generate capital. These loans in India have become popular among business owners to deal with their financial needs. These loans are not used for buying long-term assets. Generally, it is used for short-term capital expenditures. For example payment of wages, rent, debt service payments, or to finance activities, such as sales and marketing or research and development, etc.

Understanding what working capital to a business, is the core of an organization. It is the cash in hand if the assets outweigh its liabilities, that organization has working capital.

The loan is appropriate for small & medium enterprises. Likewise, for boosting their working capital needs and meeting the daily operational expenditure. The duration of a working capital loan in our country is from 6 to 12 months. The interest rate ranges from 11% to 16% depending on the lender.

What are the Benefits of a Working Capital Loan?

Working capital loans are fast and easy to secure. To address any urgent financial needs of the business. The loan amount will be received all at once in a lump sum. It increases the impact of the funding. Understanding the benefits of a working capital loan:

1. Short-tenured Loan

The repayment period is 6-12 months for these loans. This makes the loan of relatively shorter duration. Lenders offer short-term loans in the form of these loans to new businesses to fulfil small business operations.

2. Handle Financial Difficulties

Nothing can be better than a working capital loan if you find your business lending in a financial crisis at times. Poor working capital leads to financial pressure on a company. Increased borrowing, and late payments to creditors – all of which result in a lower credit rating. Banks charge a higher interest rate for any money borrowed if they possess a lower credit rating. 

3. No Collateral Required

No security or collateral is required to avail a working capital loan from a bank or non-banking financial company (NBFC). The bank will check and verify your credit history. If satisfied, then you may become eligible for unsecured working capital loans for a fixed tenure to pay it back.

4. Helps in Lean Periods

You probably face risks and challenges if you are running a seasonal business. Which creates problems in your annual revenues. These loans can help you to overcome the blasts created by the lack of sufficient funds.

5. Spend at Your Discretion

There are no restrictions on how to use the funds in working capital loans. You can use the money for all your business requirements. Though, use the money for valid needs only, to ensure that your business does not depend solely on credit to manage expenses. 

Also Read: Different Types of Working Capital Loan
About Finline!

Finline is an online platform for creating financial reports for getting bank loans and investments. It’s like ‘Canva’ but for financials. If you are an entrepreneur looking for a bank loan, you need to have a well-crafted project report. We, at Finline will help you with that. Our team will help you create a powerful business plan in ten minutes. That too in your language. All public and private sector banks working in India accept our project report. Click to create your report.

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Mudra Loan: Who can avail? Eligiblity?

Any individual running non-corporate non-farming business activities can apply for a MUDRA loan under the Pradhan Mantri Mudra Yojana Scheme. The following are the Mudra Loan Eligibility criteria:

  1. Applicants should have an age limit of 18 years and a maximum of 65 years.
  2. Individuals, startup firms, business owners, entrepreneurs, SMEs, and MSMEs are eligible.
  3. Traders, Artisans, Manufacturers, Retailers, etc. engaged only in trading, services, and manufacturing sectors are also eligible.
  4. If the applicant’s requirements in less than 10 lakh.
  5. Applicants with good repayment history, and no bank dues.
  6. People belonging to the SC/ST/OBC category.
  7. Applicants with no loan defaults with any financial institution.

The following business bodies are eligible for Mudra Loan:

1. Business vendors and shopkeepers:

Shopkeepers and vendors like fruits and vegetable vendors can apply for a loan ranging up to ₹ 10 Lakh.

2. Service Sector Units: 

Beauty parlours, boutiques, parcel services, automobile repairs, dry cleaning, gymnasiums, saloons, tailoring units, etc.

3. Textile industry: 

Textile industries such as handloom, knitting, silk work, apparel design, embroidery, traditional dying, etc. can get monetary help from mudra loans.

4. Food production sector: 

Start us dealing in food processing, shops, food parcel services, or cold storage can avail this mudra loan and expand their business.

5. Agricultural activities: 

Loans under this scheme can be availed for agricultural activities such as dairy farming, poultry, fishing, and the improvement of small canals and wells.

6. Vehicle: 

Loans will be available to purchase passenger cars, goods transport vehicles, and three-wheelers.

The eligibility documents for the Mudra loan vary for different loan purposes. The documents required for specific purposes are as follows:
  1. Documents for Vehicle Loan
  • Duly filled application form for Mudra Yojana
  • Vehicle loan application form
  • 2 passport-size photos of the applicant
  • Identity proof such as an Aadhaar Card, Passport, Voter ID Card, Driving License, etc.
  • Address proof such as an Aadhaar Card, Passport, Bank statements, telephone or electricity bill.
  • Income proof
  • Lastly, bank statement for the latest 6 months
2. Documents for Business Instalment Loan
  • Duly filled application form for Mudra Yojana
  • Loan application form
  • 2 passport-size photos of the applicant
  • Identity proof such as an Aadhaar Card, Passport, Voter ID Card, Driving License, etc.
  • Residential Address proof such as an Aadhaar Card, Passport, Bank statements, telephone or electricity bill.
  • Proof of ownership of the enterprise or residence.
  • Trade references
  • Proof of qualification, establishment, and business continuity
  • 2 years ITR and CA certified financials
  • Bank statement for the last 6 months
3. Documents for Business Loan
  • Duly filled application form for Mudra Yojana
  • Loan application form
  • Identity and Age proof such as Aadhaar Card, Passport, Voter ID Card, Driving License, etc.
  • Residential Address proof such as an Aadhaar Card, Passport, Bank statements, telephone or electricity bill
  • Proof of ownership of the enterprise or residence
  • Proof of qualification, establishment, and business continuity
  • Bank statement for the last 12 months
  • Proof of business continuity
  • Income tax return for recent 2 year
Is the Agriculture sector Eligible for Mudra Loan?

MSMEs include the agricultural sector, but only a few types of businesses in the agricultural sector are eligible for Mudra Loan:

  • Livestock
  • Poultry
  • Beekeeping
  • Fishing
  • Agribusiness centers
  • Agriclinics
  • Food and agri-produce business
Must Read: MUDRA Loan Application Form
About Finline!

Finline is an online platform for creating financial reports for getting bank loans and investments. It’s like ‘Canva’ but for financials. If you are an entrepreneur looking for a bank loan, you need to have a well-crafted project report. We, at Finline will help you with that. Our team will help you create a powerful business plan in ten minutes. That too in your language. All public and private sector banks working in India accept our project report. Click to create your report.

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Startup Business Loan

Many entrepreneurs with great business ideas are unable to start their businesses due to a lack of funds. Money at the right time is one main factor that decides the start and the future of a business. However, when new entrepreneurs start, they discover that money becomes the major hurdle. The universal solution to this is nothing but a startup business loan. You borrow a startup loan to help you start operating your business, but like every loan, you have to pay it back.

A startup business loan facility offered by banks or other financial institutes to new businesses or can be used for various purposes such as purchasing equipment, furniture, raw materials, or paying for expenses incurred to set up a business such as purchasing or leasing a building, etc,. 

How do you choose a business startup loan?

 A startup loan can be extremely difficult to obtain. The main reason is simply the fact that banks do not want to take risks. Obtaining a startup loan often requires a lot of patience, effort, and determination. The maximum amount of startup business loan you can get depends on your business, its turnover, profitability as well as your credit history. Before choosing a startup business loan consider the interest rate, repayment terms, and policy, application fees, etc.

What are the different types of Startup Business Loans?

Startup business loans are classified into two:

1. Short Term Working Capital Loan

It is known as a short-term working capital loan or a line of credit. People use it to pay salaries or other expenses. There is no need for collateral for this loan. Also, it gives an initial interest-free period. The business can utilize this loan amount for its day-to-day operational costs. It will help you to run the business activity without any hindrance of the fund.

2. Long Term Loans

Long-term loan or equipment financial loan, used to fund the expansion or growth of the business, funds the expansion or growth of the business. This loan is available for a longer period. It would require the business as collateral. People use it for purchasing heavy or expensive machinery, inventory, long-term expenses, etc.

Also know: Business Loan Schemes for Startups In India
What are the Features and Benefits of a Startup Business Loan?

Startup loans are different from other financing loans for established companies and have various benefits and specific features.

1. Flexibility: It allows the business owner to concentrate on growth rather than just worry about repayment. It offers flexible repayment tenures for startups 

2. Collateral: No collateral is required as startup loans are unsecured business loans.

3. Availability of Funds: Lenders ensure swift disbursal of the fund as soon as your loan is approved.

4. Tax Benefit: The new entrepreneurs will get three years of tax relief.

5. Compared with venture capital, the bank’s rate of return is fixed at a nominal interest rate.

Must read: Best Low Investment Business Ideas
About Finline!

Finline is an online platform for creating financial reports for getting bank loans and investments. It’s like ‘Canva’ but for financials. If you are an entrepreneur looking for a bank loan, you need to have a well-crafted project report. We, at Finline will help you with that. Our team will help you create a powerful business plan in ten minutes. That too in your language. Also, all public and private sector banks working in India accept our project report. Click to create your report.

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Business Loan Eligibility

Bank provides business loans to a wide variety of small, medium, and large enterprises, and professionals. Also, provide top-up facilities for existing business loan customers who may require more credit at a later period. To meet the business loan eligibility is the key to getting a business loan.

Business loan eligibility comprises basic conditions like CIBIL score, age, business turnover, Details are mentioned below:
  1. The business loans can be availed by business entities like:
  • Sole proprietorship firms
  • Private limited companies and closely held limited companies
  • Partnership firms
  • Self-employed individuals/ Professionals like CA’s, Doctors, etc.
  • Retailers
  • Manufactures for service
  • Traders
  • SMEs & MSMEs

2. Applicant age should be between 25 years to 68 years.

3. Applicant should be an Indian citizen, with no loan defaults

4. The business should be operational for a minimum period of 3 years

5. Turnover for 3 years must be showing an upward trend.

6. The balance sheet of the business should be audited by a registered CA.

7. The business should not be blacklisted by any entities.

8. The location of the business should not be on the negative location list.

9. Applicant should not be a defaulter of tax

10. Specify the applicant’s source of income earning

11. Applicant should submit a detailed Business Plan/Project Report

12. Applicant should own either a home, office, shop, or godown

13. CIBIL score must be above 700.

What is the CIBIL Score? What is its Importance in Availing Business Loan?

CIBIL score or credit score is a 3-digit numeric that represents the repayment capability of an applicant, along with the repayment history. The CIBIL score spans between 300-900 that is computed based on repayment history. Banks and NBFCs generally accept any score above 700 when providing business loans at reasonable interest rates. Applicants should maintain a decent CIBIL score for financial benefits or to meet business loan eligibility.

Maintaining a decent CIBIL score to avail business loan is tough. Increasing the CIBIL score is not an overnight process, as it requires time from 3-6 months. Therefore, start to build your credit score from today or at the earliest.

*Eligibility may vary as per the scheme chosen.

About Finline!

Finline is an online platform for creating financial reports for getting bank loans and investments. It’s like ‘Canva’ but for financials. If you are an entrepreneur looking for a bank loan, you need to have a well-crafted project report. We, at Finline help you with that. Our team will help you create a powerful business plan in ten minutes. That too in your language. Our reports are accepted by all public and private sector banks working in India. Click to create your report.

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Project Report For Mudra Loan

Mudra Bank loan offers loans at affordable rates to new companies. Registered company owners and entrepreneurs for setting up small & medium businesses can benefit. To get a Mudra loan the first and foremost requirement is to submit a Project Report to the Bank. 

The Project Report should include all business-related financial, economic, managerial, and technical aspects of the project or business. The report should be easy to understand and in a neat format. Applicants can create the project report on their own or with the help of an outsider like CA’s, tax consultants, or a private company who has particular knowledge.

What are the contents of a project report for Mudra Loan?

The project report consists of all business-related details. It should cover both the technical and financial aspects of the particular business. Below are the components of the project report.

  1. Introduction – Description of the business.
  2. Aim/Vision – Focus or target for which the enterprise shall work.
  3. Objective: Just as the aim, the objective of the enterprise should also be mentioned.
  4. Area of Expertise – Key areas or skills on which employees have expertise shall work.
  5. Details about the Promoters and Executive: Profile descriptions like education qualification, experience, etc.
  6. Source of Funds: Explain in detail how you are planning to raise funds for the business, owned, borrowed, etc.
  7. Financial Budget – Complete financial information on expenditure inquired like machinery cost, total cost, furniture cost, and working capital required.
  8. Financial Statements: These should the financial statements like profit & loss statements, cash flow statements, and balance sheets.
  9. Estimation: The report should include a projected estimation of sales, purchases, expenses, incomes, etc.
  10. Business Equipment Details – Exhaustive list of equipment, parts, plants and machinery to be used in the project
  11. Commercial Aspects – Plans to be executed related to commercializing the project
  12. Company Profile – Details on the company’s background, launch, initiation, milestones, and achievements
  13. Export Orders – Information on export orders, whether domestic or international, if any
  14. Information about Employees – Total number of employees working on the project with their details
  15. Information of Products and Services: Details of all the products and services to be used in the project
  16. Logistics Details: Information on transportation costs to be incurred whether private or commercial
  17. Manufacturing Processes: Details of types of manufacturing processes to be used in the project
  18. Market Potential: Information about the target market, target customer, market demand of the product, etc.
  19. Advertising Strategies: Advertising strategies to be applied or executed for the project
  20. Ratio Analysis: Computation and analysis of different ratios and their implications.
  21. Space or Land Requirement: Information on space or land requirements, if required
  22. Third-Party Details: Details of the third party engaged with the project if any like raw material suppliers, traders, manufacturers, etc.
  23. Break-Even Analysis: Specify the break-even point of the project; and its viability in terms of cost and profit.
  24. Conclusion: All project reports should have a conclusion at their end
About Finline!

Finline is an online platform for creating financial reports for getting bank loans and investments. It’s like ‘Canva’ but for financials. If you are an entrepreneur looking for a bank loan, you need to have a well-crafted project report. We, at Finline will help you with that. Our team will help you create a powerful business plan in ten minutes. That too in your language. All public and private sector banks working in India accept our project report. Click to create your report.

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MUDRA Loan Application Form

Pradhan Mantri MUDRA Yojana encourages the young generation into entrepreneurship by promoting them with financial aid, focusing on the growth of micro-enterprises. Under the Pradhan Mantri MUDRA Yojana (PMMY), MUDRA has created involvements named ‘Shishu’, ‘Kishore’ and ‘Tarun’ to denote the different stages of development and funding needs of the beneficiaries of micro, small, and medium entrepreneurs and also for the next phase of growth for their business. The amount covers: 

  1. Shishu: covering loans Up to 50,000/-
  2. Kishor: covering loans above 50,000/- and Up to 5 Lakh
  3. Tarun: covering loans above 5 Lakh and Up to 10 Lakh
What are the Important Fields and sections of the MUDRA Loan Application Form?

Below sections of the MUDRA application form are as follows:

A. For office use:
  1. Enterprise Name
  2. Application Serial Number
  3. Name of the branch
  4. Category – Shishu/Tarun/Kishor
B. Business Information:
  1. Name of the Enterprise
  2. Constitution of Enterprise – Proprietary/Partnership/Pvt
  3. Current Business Address – including State/ PIN
  4. Mobile Number
  5. E-mail ID
  6. Date of Commencement
  7. Proposed Business Activity – Skilled/Unskilled
  8. Registration Details
  9. Registered Office Address
  10. Social Category
C. Background Information of Proprietor/Partners/Directors:
  1. Serial Number, Name, DOB, Sex,
  2. Residential address with mobile number,
  3. Academic qualifications
  4. Experience in the line of activity
  5. Pan Card
  6. Proof of Identity/Address Proof
  7. Relationship with Bank/Directors, If any
D. Name of Associate Concerns and Nature of Association:
  1. Name of Association Concern
  2. Address of Associate Concern
  3. Bank Details
  4. Nature of Association concern
  5. The extent of Interest as Pro/Partner/Director or just Investor in Associate Concern
E. Banking/Credit Facilities Existing: (In Rs.)
  1. Type of Facilities – Current AC, Savings AC, Cash AC, Term Loan, LC/BG
  2. Current Bank Details
  3. Limit Availed
  4. Outstanding as of Date
  5. Security Lodged
  6. Assets Classifications
  7. If Banking with this Bank, the Customer ID
  8. Certification Statement from the Borrowers that no loan was taken from any bank or financial institution apart from the one mentioned in Section E.
F. Credit Facilities Proposed: (In Rs)
  1. Type of Facilities – Cash Credit, Term Loan, LC/BG
  2. Total Amount
  3. The purpose for which required
  4. Details of Primary Securities Offered
G. In case of Working Capital: Basis of Cash Credit Limit applied: (In Rs.)
  1. Actual Sales in the last two years
  2. Projected figures of sales, revenue, inventory, working cycle, creditors, debtors, and promoter’s contribution.
H. In case of Term loan requirements, the details of machinery/equipment may be given as under:
  1. Type of the machine/equipment
  2. The purpose for which it is required
  3. Name of the supplier
  4. The total cost of the machine
  5. A total contribution that is being made by the promoters in INR
  6. The total amount of loan that is required
  7. Repayment with moratorium period requested for 
I. Past Performance/Future Estimates: (Rs.)

Past Performance / Future Estimates and Actual performance for two previous years of:

  1. Net Sales
  2. Net Profit
  3. Capital (Net Worth in the case of Companies)
J. Status Regarding Statutory Obligations:
  1. Registration under the Shops and Establishment Act
  2. Registration under the MSME (Provisional/ Final)
  3. Drug License
  4. Latest Returns for Sales Tax Filed
  5. Latest Returns for Income Tax Filed
  6. Any other outstanding dues outstanding
K. Declaration:
  1. Declaration with photograph(s) and signature(s) of Proprietor/ Partners/ Director
  2. Mention of Date and Place
  3. Acknowledgement Slip for loan Application under Pradhan Mantri MUDRA Yojana
How to download the MUDRA Loan Application Form?

CLICK HERE::  

About Finline!

Finline is an online platform for creating financial reports for getting bank loans and investments. It’s like ‘Canva’ but for financials. If you are an entrepreneur looking for a bank loan, you need to have a well-crafted project report. We, at Finline will help you with that. Our team will help you create a powerful business plan in ten minutes. That too in your language. All public and private sector banks working in India accept our project report. Click to create your report.

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What are the Documents Required for Mudra Loan?

PMMY loan offers up to Rs. 10 Lakh for MSMEs for non-corporate non-farming origin businesses. The objective is to encourage the young generation into entrepreneurship by promoting them with financial aid, focusing on the growth of micro-enterprises. The applicant will require some specific documents to produce to the bank. Below are the documents required for Mudra Loan:

1. Proof of Identity
  • Applicant should produce self-attested photocopies of:
  • Aadhar Card
  • Driving License
  • Voter ID
  • PAN Card
  • Passport
2. Proof of Address
  • Utility Bill copy of electricity, telephone, gas, property tax, etc.
  • Aadhar Card
  • Driving License
  • Voter ID
  • Passport
  • Latest bank account statement
3. Duly fill out the application form for the Mudra loan
4. Applicant passport size photo in 2 number
5. Proof of Business
  • Certificate of Registration
  • Business License
  • Articles of Organization
  • Proof of Business Ownership
  • Or any other documents confirming the business existence and address
6. Business Plan/Project Report

A business plan also known as a project report is a crucial document when applying for a bank loan. The bank uses this document to analyze the overall feasibility, risks, financial viability, and potential of a project. A well-crafted and convincing project report increases the chances of loan approval. With Finline you can craft a compelling project report in less than 10 minutes. That too in your language. Our reports are accepted by all public and private sector banks working in India. Click to create your project report.

7. Other Mudra Loan Documents
  • Photos of owners, partners, etc.
  • Proof of Category – SC/ST/OBC
  • Estimated balance sheet for the loan period
  • Income/sales returns
  • Last 12 month’s Bank Statement
  • Partnership Deed or MoA or AoA
  • Sales during the period and estimated sales for the loan period
  • Business report certifying the economic and technical viability of the business

 Based on the type of business and bank, the documents required for Mudra loan change as per the specific loan schemes like Shishu, Tarun, and Kishor.

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Documents Required for Business Loan

An entity may construct or expand a business unit using a loan. You can use the obtained cash for general company expenses such as purchasing machinery for plants, hiring personnel, renting office space, paying off the mortgage, and more. Thankfully, obtaining a business loan is simple. You can get the money in a few days if you match the eligibility requirements and have the necessary business loan paperwork. You must provide a certain set of supporting papers when requesting for a business loan. Important documents required for business loan: 

  • Application form.
  • Passport size photograph
  • Identity documentation of the applicant
  • Proof of Address for verification
  • Verification of age
  • Financial Records
Document list that can be used for identity verification
  • Passport
  • MPIN (Market Participant Identification Number) card
  • Voter’s ID card
  • Driver’s license
  • PAN card
Document list that can be used for address verification
  • Voter ID
  • Ration card
  • Telephone bill
  • Lease agreement 
  • Power bill
Document list that can be used for age verification
  • PAN card
  • Voter’s ID
  • Passport
Financial records needed for obtaining business loans
  • Bank account statements from the previous six months
  • Income tax returns from the previous two years
  • A chartered accountant’s audited P&L
  • balance sheet from the previous two years

The self-employed sector requires different papers for the professional and non-professional categories.

Documents needed for self employed professionals
  • Identity proof of the applicant (any documents mentioned above can be used)
  • returns of income taxes for at least three years
  • A driver’s license, ration card, passport, or voter ID that serves as proof of residency for the single proprietor
Documents needed for self employed non-professionals
  • Identification documentation for the proprietorship
  • Documents for the last three years’ tax returns, including sales tax.
  • A copy of the most recent three months’ worth of monthly stock and creditors statements
  • Last six months’ value of the primary banker’s bank statements
Recommended Articles

You might also like to read the article on the documents required for obtaining a MUDRA Loan.

About Finline!

Finline is an online platform for creating financial reports for getting bank loans and investments. It’s like ‘Canva’ but for financials. If you are an entrepreneur looking for a bank loan, you need to have a well-crafted project report. We, at Finline help you with that. Our team will help you create a powerful business plan in ten minutes. That too in your language. Our reports are accepted by all public and private sector banks working in India. Click to create your report.

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Mudra Loan Interest Rate

The Government of India has introduced the Mudra loan intending to promote affordable business and entrepreneurship loans. The full form of Mudra is Micro Units Development and Refinance Agency Loans which are provided to small enterprises and non-farm agencies, trading, and manufacturing. 

The interest rates of MUDRA loans may vary from bank to bank. Subject to requirements MUDRA categorizes these loans into three segments, Shishu, Kishor, and Tarun. Therefore the interest rates also change depending on each segment, based on their needs and prescribed guidelines.

What are the Interest rates under MUDRA?

The MUDRA loan interest rate for these categories varies depending on the amount borrowed and how it will be used. Below in detail shows the interest:

Shishu Loan:

Under Mudra, Shishu loan provides small entrepreneurs up to Rs. 50,000 for a repayment period of five years, to establish their business. The interest rate for this loan will be from 1 per cent per annum to 12 per cent per annum.

Kishor Loans:

This loan will be useful for one who already kicks start their business but needs capital for running the business’s day-to-day activities. Also for new ventures where the Shishu loans are not sufficient, they can opt for Kishor loans. Kishor loans will allow the applicant to borrow between Rs. 50,000 and 5 Lakhs. The interest rate for Kishor loans ranges between 8.05 per cent to 11.05 per cent. Sometimes the interest rate will go higher based on the existing guidelines or credit rating of the borrower.

Tarun Loan:

Growth to the next phase of an existing business requires funding at the correct time, entrepreneurs can apply for a Tarun loan for the expansion. Applicants can get a loan amount between Rs. 5 Lakh to Rs. 10 Lakh. The loan tenor will be decided by the bank as per their policies. The interest rate for the Tarun loan ranges between 11.5 per cent to 20 per cent. 

How to get a Mudra Loan at a low-interest rate?

Follow the below-mentioned suggestions to get a Mudra loan with low interest rates:

  • Research about banks offering Mudra loans.
  • Compare banks offering Mudra loans and their interest rates.
  • Applicant’s banking history and repayment capability play a factor in reducing the interest rates
  • The higher the annual turnover, the lower the interest rate
  • Applicants with no previous loan defaults will have an advantage
  • The nature of business will define the interest rates
Below are the interest rates provided by a few banks:
Lenders Interest Rate
SBI 9.75% onwards
Bank of Baroda 8.15% onwards
Oriental Bank of Commerce 9.65% onwards + SP (Strategic Premium)
Corporation Bank 9.90% onwards
Bank of Maharashtra 8.15% + BSS onwards
Andhra Bank 8.20% onwards
Punjab National Bank 9.60% onwards

 These interest rates also will vary at the discretion of the banks and RBI. Also, GST and other fees will be extra imposed on the amount. Click here to learn more about, how to apply for a Mudra loan?

About Finline!

Finline is an online platform for creating financial reports for getting bank loans and investments. It’s like ‘Canva’ but for financials. If you are an entrepreneur looking for a bank loan, you must have a well-crafted project report. We, at Finline will help you with that. Our team will help you create a powerful business plan in ten minutes. That too in your language. All public and private sector banks working in India accept our project report. Click to create your report.