Many small business owners in India are unaware that they can apply for a second loan under the PMEGP or MUDRA scheme to upgrade their existing units. I was one of them—despite running a government-financed unit under MUDRA, I didn’t know this upgradation loan even existed until much later. This post is to help other entrepreneurs like me understand the opportunity, criteria, and how to benefit from it.
What is the Second Loan for PMEGP/MUDRA Units?
The Ministry of MSME offers a second loan under the PMEGP (Prime Minister’s Employment Generation Programme) or MUDRA Yojana to help existing units upgrade their technology, expand capacity, or modernize their machinery. This is different from the initial loan taken to start your business.
Key Features:
- Loan amount: Up to ₹1 crore
- Subsidy: 15%–20% subsidy (depending on location and category)
- Interest rate: Normal interest rates as per bank norms
- Collateral-free: Covered under CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises)
- Eligible for working capital or term loan
Who is Eligible?
To apply for the second PMEGP/MUDRA upgradation loan:
✅ You must be running a viable unit that was previously financed under PMEGP or MUDRA
✅ The unit must have a good repayment track record (no defaults)
✅ The unit should have completed at least 18 months of successful operations
✅ The upgrade should be for technology improvement, expansion, or diversification
You may also like:The reality of collateral free loan
My Personal Experience
When I first took a MUDRA loan, I focused all my energy on starting the unit. Like most first-time entrepreneurs, I wasn’t told about the possibility of a second loan for business expansion. I only found out much later—after missing several growth opportunities. Banks also don’t proactively promote this scheme, and unless we ask, we often remain unaware.
Even when you approach the bank, they would seem hesitant. It would be only after multiple visits and showing commitment that they would agree to process the upgradation loan. This persistence would be worth it.
Why You Should Consider This Loan
Here are the opportunities you can unlock through the second PMEGP/MUDRA loan:
🚀 Scale up production without waiting for organic growth
🔧 Invest in better machinery and improve quality/output
📈 Expand your market with new product lines
💼 Create more jobs and qualify for further government benefits
How to Apply?
- Visit your financing bank where the first loan was taken
- Submit your upgradation proposal and financials
- Apply online through the PMEGP e-portal or MUDRA site (if eligible)
- Ensure your unit is registered with Udyam/MSME portal
Final Thoughts
If you’ve started your business with the support of PMEGP or MUDRA, don’t stop there. The second loan is a powerful yet underused tool to take your business to the next level. I missed out early because of unawareness, but you don’t have to.
📢 Spread the word to fellow entrepreneurs—this scheme can change the growth game!
