Shishu Mudra Loan: Eligibility & Benefits

The Shishu Mudra Loan is one of the key components of the Pradhan Mantri Mudra Yojana (PMMY) scheme, a flagship initiative that the government of India launched in 2015. Under the scheme, the government aims to offer business loans to encourage people to start their own small businesses, make their business idea a reality, and help the existing businesses develop and grow further.

If you are an MSME (micro, small, medium enterprise) owner in India and are looking for funds or obtaining a loan through a form credit system, then you ought to know about this scheme and take advantage of it. If you are not sure what the Shishu Mudra Loan scheme is all about, what are its eligibility, interest rate, and benefits, then this guide is just for you. Read on!

What is a Shishu Mudra Loan?

The term ‘Shishu’ means infant in the Hindi language, symbolising the nascent stage of small businesses and their need for financial support from a reliable and credible source. This government-backed loan scheme is available to all micro and small business owners, including those who want to start their entrepreneurial journey.

Under the scheme, you can get a loan of any amount ranging from Rs. 10,000 to Rs. 50,000 and get your business up and running or sustain the operations for long. Let us look at some of the important aspects of Shishu Mudra Loan.

• Interest rates

  The Shishu Mudra loan interest rate is lower than other loans and credit schemes offered by private lenders and informal financial institutions. The exact rate of interest applicable on your loan may vary based on the lending institution. However, in general, the Shishu Mudra Loan interest rate ranges from 1% to 12% per annum, allowing you to easily manage the repayment.

  
  

• Loan tenure

  Apart from getting the loan at a lower interest, when you apply for Shishu Mudra Loan scheme, you also get the flexibility to choose the repayment tenure, ranging from 12 to 36 months. You can choose tenure as per your business financial capacity.

  
  

  The extended term allows you to easily manage the cash flow in the business and repay the amount in affordable EMIs (equated monthly installments). Also, it allows you to align to repay the amount as per your revenue pattern.

  
  

• Easy application process

  Another critical aspect of Shishu Mudra Loan is that it is easy to avail. Realising the diverse needs of the target audience, the government of India has made it possible for loan applicants to apply for the loan both online and offline

  
  

  Also Read: MUDRA Loan Eligibility – Beginner's Guide

  
  

So, if you are tech-savvy, you can apply for a loan online from the comfort of your home or office and get the desired with just a few clicks of a button. If you are not comfortable with online applications or don’t have an internet facility, you can visit any of the nearest bank branches that are authorized to extend the loan and get the desired funds.

Eligibility for Shishu Mudra Loan

Just like any other type of credit, you may avail from a financial organisation, to get funds for your business through Shishu Mudra Loan, you must meet certain Shishu Mudra loan eligibility requirements, which include:

• Citizenship – You must be a resident Indian citizen. This loan scheme is not available for NRIs (non-resident Indians)
• Age limit – You must be at least 18 years old at the time of applying for the loan. And the maximum age limit is capped at 65 years.
• Business type – To get funds for your business through Shishu Mudra Loan scheme, the business enterprise you own must fall under the micro-enterprise category.
• Business operation – The business enterprise you own must be engaged in a viable business activity like manufacturing, trading, agriculture, or services.

Documents required for getting Shishu Mudra Loan

When you apply for a Shishu Mudra Loan, you must oblige with the documentation process and keep the following documents ready to avoid any last-minute hassle.

• Proof of identity – Aadhaar Card, PAN Card, Voter ID, Passport (you can submit any one of these)
• Proof of residence – Rent agreement, utility bills, Aadhaar card (you can submit any one of these)
• Proof of business ownership – GST registration, trade license, etc.
• A detailed business plan that states the purpose of obtaining the loan, the business potential financial prospects
• Financial documents – Bank account statement for the last six months showing business income or income tax returns (for self-employed individuals)
• Passport size photographs – Recent pictures for identification purposes
• Other documents – As required by the financial organization

Features and Benefits of Shishu Mudra Loan

• No guarantor required

  To avail Shishu Mudra Loan, you need not provide any third-party guarantor. This makes the application process simpler and easier for all. Whether you are a self-employed individual or own a micro-business, you can easily get the loan amount you want.

  
  

• Collateral-free loan

  Another benefit of the Shishu Mudra Loan is that it is an unsecured loan. This means you need not provide any collateral or security to the lender to avail the funds. This feature is especially beneficial for small business owners who may not have any major business assets that they can pledge.

  
  

• Margin amount not needed

  Undoubtedly, one of the most borrower-friendly features of the Shishu Mudra Loan scheme is that it does not require you to offer any margin money. This means you can borrow the entire loan amount that you desire without the need to contribute any amount upfront, making the loan accessible to small business owners who have limited resources.

  
  

• Flexible loan option

  The Shishu Mudra Loan is one of the most flexible credit options available for small business owners in terms of its application. As a borrower, you can use the funds you get for any purpose you want to meet the business requirements.

  
  

  You can use the loan to meet the capital requirements for your business, buy new machinery to increase production, upgrade to innovative technology in your line of business, etc.

  
  

• Minimal processing fee

  To ensure that the Shishu Mudra Loan is accessible to all and a maximum number of potential borrowers take advantage of it, the government of India has kept the processing fee for such loan to a bare minimum.  While some of the partner financial organisations charge zero processing fees, others may charge a fee of 0.5% of the sanctioned loan amount.

  
  

  The low processing fee structure ensures that the upfront borrowing cost does not deter you from availing of the loan.

Conclusion

The Shishu Mudra Loan scheme is a boon for all small business owners in India. It allows you to get the desired funds to make your business idea a reality and/or take your existing business to new heights of growth and success.

If you are looking for any other business loan solution apart from the government scheme, you can find plenty of business loan and investment solutions offered by Udyog Plus, which is an integral part of Aditya Birla Finance Limited.

They offer an unsecured business loan for all at the most competitive interest rates, with extended repayment tenure and flexible terms to suit your needs.