Many small and medium enterprises struggle to secure business loans from banks or financial institutions due to limited collateral and insufficient funds to cover the interest payments. To combat this, the government introduced the Mudra Yojana, which is a financial initiative aimed at supporting micro-units by offering them the necessary funds to scale their business.
If you are looking for an easy and hassle-free business loan, then we’ve got you covered. A Mudra loan can be the appropriate way ahead. However, before applying keep these simple tips and tricks in mind.
Top 10 Tips for Securing a Mudra Loan in India
Here are the top 10 effective strategies that small and micro-enterprises can adopt, to maximise the benefits of a Mudra loan. Let’s take a closer look.
- Write a Thorough Business Plan
One of the most important eligibility criteria for a Mudra loan involves a well-written business plan. It should have all the information about your business, your target market, financial forecasts, competitors, and marketing strategy. The objective is that the lender should be able to determine from your business plan that it can generate jobs, has a solid growth potential, and is financially viable.
- Recognize the Loan Process and Procedure
Before you apply for a Mudra loan, make sure you are aware of the requirements along with the loan application process. This will help you ward off mistakes or any signs of delay during the application process.
- Be Honest
Never lie or hide whatever documents or details the loan provider may ask you. Always come up with the truth to avoid being turned down. Incorrect information can cause loan denial.
- Get All the Paperwork You Need
Your paperwork must be highly strong if you want to apply for a Mudra loan. Gather all the paperwork and documentation you need ready. Some of these may include your identity proof. address proof, or business proof along with certain financial documents like the tax returns. You will also need to present the right business paperwork. This may include a GST registration, TAN card, PAN card, and so on.
- Use the Funds to Grow Your Business
Always use the loan to scale up your business. This will ultimately create more jobs. You will also have a better chance of getting business loans if you actually keep it to proper use. One way to use the loan money is to hire more individuals, increase the production/amount of work that can be done, or buy new tools or machines.
- Use Government Schemes
The government of India has set up a plethora of programs to extend help to small and medium businesses. It is recommended that you adopt these programs to gain extra benefits and leverage your business. If you use these programs, the government may give you subsidies, tax breaks, and other forms of financial help.
- Pay Back the Loan on Time
You have a maximum of five years to pay back a Mudra loan. To keep your credit score high and increase your chances of getting loans in the future, you need to make the repayments on time every month. Making late payments or not paying at all may negatively impact your credit rating eventually making it harder to secure business loans in the future.
- Know the Repayment Schedule and Interest Rate
To get the most out of a Mudra loan, you need to know the interest rate and when the payments are due. Also, note that several things can cause the interest rates to change. This includes the loan size, terms, conditions, and policies of the loan provider.
- Get Expert Advice
Financial experts like accountants and business managers help you set up a detailed business plan and make financial projections. They can also provide you with expert advice on working capital management and how to apply for business loans.
- Follow Up
After applying, always stay in contact with the lender to inquire about any modifications or updates. You may resolve any concerns or complaints instantly by reaching them upfront.
Wrap Up
In conclusion, a Mudra loan is super helpful for medium and small businesses that need the necessary funds to scale. However, you must be aware of the different kinds of Mudra loans that are out there, as well as their collateral, interest rates, and loan amount. Additionally, doing good background research on different financial organisations that offer Mudra loans is a good idea.
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