The wave of entrepreneurship in India is unstoppable. Today, you can find people of all ages and genders dreaming of starting their businesses. Small and micro enterprises are actively contributing to India’s economic growth. The government is making conscious efforts to boost the ongoing entrepreneurship wave. They are introducing various favourable policies and schemes for this purpose.

Pradhan Mantri MUDRA Yojana is a flagship scheme by the government to provide affordable financing to small and micro enterprises. Under MUDRA, you can avail a significant Loan amount at a competitive interest rate. It is a collateral-free Loan facility. This means you need not provide assets to get the financing.

You only need to meet simple eligibility criteria for the Loan. You should consider applying for a MUDRA Loan or any other Business Loan under the following circumstances:

• Have a solid action plan

You should have a solid action plan before applying for a Loan. Be clear about your reason for applying for a Loan, be it to establish your start-up or expand your existing business. Once you clearly understand why you need the Loan, you can accurately determine your Loan amount requirement.

• You can repay the Loan amount

You should only apply for the Loan if you know you can repay the Loan amount. Delayed and non-payments can place you in trouble. Hence, you should only apply for a Loan when you can afford to. You can determine your Loan repayment affordability by using a Business Loan calculator. It is an online calculator that helps determine the equated monthly instalments.  

You need to enter the precise Loan variables to get accurate results. If the calculated EMI amount is within your affordability, you should move forward with your Loan application. If the EMI amount is beyond your affordability, consider adjusting your Loan variables or re-apply when your financial position is better.

• When the return on capital is higher than interest rates

Whether you apply for the Loan to establish your start-up or expand your existing business, you do so to generate decent revenue. Return on capital is the revenue you can generate, given your capital investment. The higher the return on capital, the better it is.  Generally, applying for a Loan is best when the return on capital is higher than the Loan interest liability.

You can determine the Loan interest using the Business Loan calculator. Only if the return on capital is decent investing makes sense. A higher return on capital ensures you can repay the Loan in time and keep decent profits for yourself.