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Mudra Loan vs Business Loan

Highlights

  • See the Major Differences between the Mudra Loan and a Business Loan.
  • Explore the Differences between the Documents Required for a Business Loan and Mudra Loan.
  • Both the Loan Products are available online so you can apply for any Loan Product.

Every businessman wants to expand their business and other resources. But in order to do that they prefer external financial help known as a loan. So they get confused between Mudra Loan vs Business Loan because both of them are a type of loan. On the other hand, these two loans are two different loan products given to the business owners depending on their eligibility. There are many banking and non-banking financial institutions that grant business loans and Mudra loans. But it is really necessary for you to know the difference between these two loans. So, you must compare the business loans and Mudra loans in this article and decide the best one for your business.

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    Comparison of Mudra Loan vs Business Loan

    Here you can have a detailed comparison of both the loans and then it would be easy for you to decide the best loan for your business. It will help you to expand your business activities and generates revenue.

    Basis of DifferenceMudra Loan
    Business Loan
    MeaningThe word MUDRA stands for Micro Units Development & Refinance Agency Ltd. and it is a government scheme that is specifically introduced and set up by the government. This scheme is designed to help small business owners by giving them loans for their business expansion.
    There are many MUDRA loan benefits, such as the borrower can avail of a loan up to ₹10 lakhs.
    The business loan is a non-government scheme offered by different banking and non-banking financial institutions to the borrowers. These loans help the business owners to boost up the financial position of their business and generate more profits.
    OriginThe MUDRA scheme was launched by the Hon’ble Prime Minister on April 8, 2015, for the micro and small industries.The business loan was started earlier and was introduced by different Banking Institutions and NBFCs in India
    Maximum Loan AmountIf you are willing to take a Mudra Loan then the maximum limit for the MUDRA Loan is ₹10 Lacs.In the case of applying for a business loan, the maximum limit of the loan amount varies from institution to institution.
    Interest RateIt is really necessary for you to know the interest rate before you are applying for any loan and 8% is the starting rate of interest for the Mudra Loan.The Business Loan Interest Rate depends on the institution from which you are borrowing the loan. On the other hand, the interest rate might be low if you have a healthy relationship with the bank.
    Mode of ApplyingYou can easily apply for the Mudra Loan Online or visit the nearest branch.The business loans can also be applied online and by visiting the nearest branch.
    Collateral FreeYou will not have to mortgage anything in order to apply for the Mudra Loan.The amount of the loan might be low if you are applying for a business loan without Collateral.
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    Eligibility Criteria for Mudra Loan vs Eligibility Criteria for a Business Loan

    The eligibility criteria for the Mudra Loan is quite strict in the comparison with the business loans. Individuals who are the small manufacturers, artisans, fruit and vegetable dealers, shopkeepers, and individuals engaged with agriculture are only eligible to apply for the Mudra Loan.

    But on the other hand, the eligibility criteria of the business loan are not so strict. You can see the eligibility criteria for the business loan below:-

    • The business vintage of at least two years
    • Last year ITR of at least Rs. 1.5 lakhs
    • Minimum turnover of more than Rs. 10 lakhs
    • Business place and the house should be separate
    • A business owner should either own a business place or house

    This is a tentative criterion and it might differ from one lending institution to another.

    Comparison of the Documents Required for a Mudra Loan and Business Loan

    Now you must see the documents that are required to take a business loan and Mudra Loan. Then it will become easy for you to determine the loan product depending upon the documents you have.

    Documents Needed for Mudra Loan

    • Identity proof – PAN card, driving license, voter ID card, Aadhaar card, Passport, etc.
    • Residence proof – Recent electricity bill, telephone bill, passport, voter ID card, Aadhaar card, etc.
    • Passport size photo – 2
    • Identity proof of business establishment
    • Address proof of the business
    • Rental agreement of the business premise, if rented
    • SSI registration certificate
    • If the small business loans are above Rs. 2 lakh, then audited balance sheet of the previous two years along with sales tax ad and income tax.
    • Clearance certificate from pollution board
    • Partnership deed for partnership business
    • For a company, Memorandum of Association and Articles of Association
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    Documents Needed for a Business Loan

    • PAN Card
    • Bank Statement as asked by the Lending Institution
    • Business Proof
    • Address Proof
    • ITR Documents as asked by the Lending Institution

    Conclusion

    Once you know thedifference between Mudra Loan and Business then it will be easy foryou to choose the best loan product for your business expansion. Nowyou know the difference and you can easily apply for any loanproduct. Make sure that you have complete documents if you areapplying for the Mudra Loan or a Business Loan.

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