PM Mudra Loan: Eligibility, Benefits, How to Apply

If you are a small business owner, shopkeeper, startup founder, or self-employed professional looking for funding, the PM Mudra Loan can be a strong option. It is designed to support micro and small businesses in India with easy access to credit.

Launched under the Pradhan Mantri Mudra Yojana, this scheme helps non-corporate and non-farm small enterprises get loans without collateral. At Saarathi.ai, we have observed that many small business owners are eligible for Mudra loans but are unsure about categories, documentation, or the right lender.

Let us understand everything in simple terms.

What Is PM Mudra Loan?

Pradhan Mantri Mudra Yojana is a government-backed initiative launched in 2015 to promote entrepreneurship.

It is implemented through Micro Units Development and Refinance Agency, commonly known as MUDRA.

The scheme provides loans up to Rs 10 lakh to small businesses engaged in:

• Manufacturing

• Trading

• Services

• Agriculture allied activities

The main goal is to promote financial inclusion and self-employment.

Categories of PM Mudra Loan

Mudra loans are divided into three categories based on business stage and funding requirement.

Shishu

• Loan up to Rs 50,000

• Best for new or early-stage businesses

• Suitable for small vendors, tailors, mechanics, home-based businesses

Kishore

• Loan from Rs 50,001 to Rs 5 lakh

• Suitable for growing businesses

• Ideal for small shops, service providers, small manufacturing units

Tarun

• Loan from Rs 5 lakh to Rs 10 lakh

• Designed for established small enterprises planning expansion

Choosing the right category depends on your business size and funding need.

Who Is Eligible for PM Mudra Loan?

You may be eligible if you are:

• Small business owner

• Self-employed individual

• Proprietor

• Partnership firm

• Micro enterprise

• Startup in early stage

You must be involved in non-farm income-generating activity.

Basic requirements usually include:

• Indian citizenship

• Age above 18 years

• Business plan or activity proof

• No history of willful loan default

A good credit score improves approval chances, though small-ticket loans may have relaxed requirements.

You can check your eligibility instantly using Saarathi AI before applying.

Interest Rate on PM Mudra Loan

There is no fixed interest rate under PM Mudra Yojana.

Interest rates depend on:

• Bank or NBFC policy

• Loan category

• Business profile

• Credit history

• Risk assessment

Typically, Mudra loan rates range between 8 percent and 12 percent per annum, but actual rates vary across lenders.

Comparing multiple lenders is important because even a small difference in interest rate affects your EMI significantly.

You can compare business loan offers on Saarathi.ai to identify suitable lenders aligned with Mudra guidelines.

Is Collateral Required?

One of the biggest advantages of PM Mudra Loan is that it is generally collateral-free.

Loans are covered under the Credit Guarantee Fund for Micro Units, which reduces lender risk.

This makes it attractive for first-time entrepreneurs who do not own property to pledge.

Documents Required

While documentation may vary, commonly required documents include:

• Identity proof

• Address proof

• Business proof

• Bank statementsQuotation for equipment if applicable

• Recent photographs

For higher loan amounts, lenders may ask for income tax returns or financial statements.

Digital application processes are becoming common, reducing paperwork and speeding up approval.

How to Apply for PM Mudra Loan

You can apply through:

• Public sector banks

• Private sector banks

• Regional rural banks

• NBFCs

The process generally includes:

• Filling application form

• Submitting business details

• Providing required documents

• Credit evaluation

• Loan sanction and disbursal

Approval timelines vary from a few days to a few weeks depending on documentation and lender workload.

Through Saarathi.ai, you can explore business loan options that align with Mudra requirements and complete much of the process digitally.

Benefits of PM Mudra Loan

• No collateral requirement

• Encourages small business growth

• Flexible loan categories

• Promotes women entrepreneurship

• Supports financial inclusion

Many women entrepreneurs have benefited under this scheme, especially in rural and semi-urban areas.

Common Reasons for Rejection

• Incomplete documents

• Poor credit history

• Unclear business plan

• High existing debt

• Mismatch in application details

At Saarathi.ai, we have observed that pre-checking eligibility reduces rejection risk significantly.

Our AI-based recommendation engine analyzes your profile and suggests lenders where your approval chances are higher.

Mudra Loan vs Regular Business Loan

Mudra loans are government-supported and designed for micro enterprises. Loan amount is capped at Rs 10 lakh.

Regular business loans can offer higher loan amounts but may require stronger financial records or collateral.

If your funding requirement exceeds Rs 10 lakh, exploring standard business loan options on Saarathi.ai may be more suitable.

Tips to Increase Approval Chances

• Maintain clean credit history

• Keep business bank account active

• Prepare clear business pla

• Avoid multiple loan applications at once

• Submit accurate information

Even small errors in application can cause delays.

FAQs

1. Can a new business apply for PM Mudra Loan?

Yes. Shishu category is specially designed for new businesses.

2. Is there any subsidy in PM Mudra Loan?

Mudra itself does not provide direct subsidy. However, some state schemes may offer additional benefits.

3. How long does approval take?

Approval time depends on lender and documentation. It can take from a few days to a few weeks.

4. Can women entrepreneurs apply?

Yes. The scheme actively encourages women entrepreneurs.

5. Can I apply online?

Many banks and digital platforms allow online application. You can explore suitable lenders digitally through Saarathi.ai.

Conclusion

PM Mudra Loan is a powerful initiative to support India’s micro and small businesses.

Before applying, remember:

Choose the correct category
Prepare proper documents
Maintain clean credit record
Compare lender interest rates
Borrow only what your business can repay

Instead of approaching just one bank, discover personalized business loan options on Saarathi.ai. Compare multiple lenders, check eligibility instantly, and move closer to your entrepreneurial goals with full transparency and AI-powered support.