The Pradhan Mantri Mudra Yojana (PMMY) was launched by the Hon’ble Prime Minister on 8th April, 2015. Under the scheme, collateral-free loans are provided to small business entities, for activities like business, trading, manufacturing, etc.
The scheme is implemented through Public Sector and Private Sector Banks, Regional Rural Banks (RRBs), Micro-Finance Institutions (MFIs) and Non-Banking Financial Companies (NBFCs).
Business Loan
A business loan is a loan availed by individuals or companies to meet their business needs. The loan amount can be used for various purposes such as working capital requirements, purchase of machinery, equipment, land, etc. Business loans can be availed from banks, financial institutions and NBFCs.
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What is a Mudra Loan?
A mudra loan is a loan given by the government of India to small businesses and entrepreneurs. The loan is given in order to help them grow and expand their businesses. The loan is given at a very low interest rate and the repayment period is also very flexible.
The main aim of the mudra loan is to provide financial assistance to small businesses so that they can create more jobs and contribute to the economic growth of the country. The loan can be used for various purposes such as working capital, machinery, equipment, etc.
There are two types of mudra loans – Shishu loan and Kishor loan. Shishu loan is for businesses with a turnover of up to Rs. 50,000. Kishor loan is for businesses with a turnover of more than Rs. 50,000.
The interest rate on a mudra loan is very low – around 9%. The repayment period is also very flexible – up to 5 years. There is no collateral required for a mudra loan.
If you are a small business owner or entrepreneur, then a mudra loan can be a great option for you. It is a very affordable and flexible loan that can help you grow your business.
What is a Business Loan?
A business loan is a loan that is specifically designed for business purposes. The loan can be used for a wide variety of business purposes, such as expanding your business, buying equipment, or even just managing your cash flow.
There are a few different types of business loans, but the most common is a term loan. A term loan is a loan that is repaid over a set period of time, typically 1-5 years. The loan will have a fixed interest rate, and you will make regular payments until the loan is paid off.
Another common type of business loan is a line of credit. A line of credit is similar to a credit card, where you can borrow up to a certain amount, and you only have to pay interest on the amount that you actually borrow.
Business loans can be a great way to finance your business, but it is important to compare different loans and choose the one that is right for your business. Make sure to shop around and compare interest rates, fees, and repayment terms before you apply for a loan.
Key Differences Between Mudra Loan and Business Loan
A business loan and a Mudra loan are both types of financing that can be used to support the growth of a small business. However, there are some key differences between the two that you should be aware of before you decide which one is right for your business.
Mudra loans are specifically for businesses that are in the early stages of development and are looking for working capital to support their growth. Business loans can be used for a variety of purposes, including expanding your business, buying new equipment, or hiring new employees.
One of the main differences between a Mudra loan and a business loan is the interest rate. Mudra loans have a fixed interest rate of 7.5% per year, while business loans can have variable interest rates that can be higher or lower than this depending on the lender.
Another difference is the repayment terms. Mudra loans must be repaid within 5 years, while business loans can have repayment terms of up to 10 years.
Finally, the eligibility requirements for a Mudra loan are different from those for a business loan. To be eligible for a Mudra loan, your business must have a turnover of less than Rs 10 lakhs per year. There is no such requirement for a business loan.
So, which one is right for your business? If you are in the early stages of development and are looking for working capital to support your growth, a Mudra loan could be a good option. If you need financing for a specific purpose, such as expanding your business or buying new equipment, a business loan might be a better choice.
Conclusion
When it comes to business finance, there are a lot of options available for small business owners. But, two of the most popular financing options are Mudra loan and business loan. So, what are the differences between these two financing options? Let’s take a look:
Mudra loan is a government-backed loan program designed specifically for small businesses. on the other hand, business loan is a kind of loan that can be availed by any business, irrespective of its size.
Mudra loan can be availed for a variety of purposes, such as working capital, equipment purchase, business expansion, etc. However, business loan can be availed for any business purpose.
Mudra loan has a fixed interest rate, whereas business loan interest rate may be fixed or variable.
Mudra loan has a repayment tenure of 5 years, whereas business loan tenure can be anywhere from 1 to 5 years.
Mudra loan can be availed by businesses with an annual turnover of up to Rs. 10 lakhs. There is no such restriction on business loan.
So, these are some of the key differences between Mudra loan and business loan. Hope this helps!