What is Mudra Loan? Types, Eligibility & How to Apply Online

Launched in April 2015, the Pradhan Mantri Mudra Yojana (PMMY) helps small, non-farm, and non-corporate businesses by offering collateral-free loans up to ₹1,000,000. Some banks extend this limit to ₹2,000,000 under special schemes like Tarun Plus.

MUDRA (Micro Units Development and Refinance Agency) does not lend directly. Instead, it refinances banks and NBFCs, which provide loans to small business owners in manufacturing, trading, services, and related sectors.

Example: How Sapna Singh Started Her Cloud Kitchen

In 2022, Sapna Singh from Lucknow took a ₹45,000 Shishu loan under Mudra to start a cloud kitchen at home. She bought kitchen tools and a second-hand fridge, and registered on food delivery apps. Within nine months, daily orders grew from 8 to over 60, and her monthly income crossed ₹120,000.

Seeing this success, Sapna applied for a ₹350,000 Kishor loan to hire staff and expand. Her story shows how a small loan can fuel growth.

Now, let’s explore what a Mudra loan is, its types, eligibility criteria, and how to apply online.

Types of Mudra Loans

The Mudra loan scheme offers different types of loans to help small businesses at every stage. Whether you’re just starting out or looking to expand, there is a loan category to suit your needs. Below is a simple guide to the four main types of Mudra loans, with an example of how Tina, a small business owner, used them to grow her cafe.

Using the right Mudra loan can make a big difference in growing your business. Like Tina, many entrepreneurs take small steps with these loans and build successful businesses over time. Choose the loan that fits your stage and plan your growth confidently.

What are the Eligibility Criteria of Mudra Loans?
 

Also Read – Qualifying for a Government Business Loan
 

Tips for a Successful Application
 

• Make sure you have all the necessary documents ready before applying.
   
• Maintain a good credit record to improve your chances of approval.
   
• Choose the right loan category based on your business stage and needs.
   
• Approach a bank or NBFC that participates in the Mudra scheme for quick processing.

Meeting these criteria will help you apply smoothly for a Mudra loan and take your business to the next level.

How to Apply Online for Mudra Loans?

You can apply for a Mudra loan online by visiting the Udyamimitra portal or the official website of a participating bank or NBFC. The process is simple and only takes a few steps if you have your documents ready.

Read More - Business Loan Without Any Collateral
 

Example: Tina’s Experience

Tina applied online for a ₹300,000 Kishor loan in 2024. She uploaded her Aadhaar, address proof and 6 months’ bank statements. She received two loan offers and picked one with an 11% interest rate and a 5-year term. Her loan was approved and sent to her account within 7 working days.

Read More - Qualify for a Government Business Loan

Final Tip:

Make sure your documents are clear and complete before you apply. A good bank record and choosing the right loan type can speed up the approval process.

Conclusion
 

A Mudra loan helps small business owners and new entrepreneurs get funding without giving any security. Backed by the Government of India, this scheme offers loans up to ₹2,000,000 to support people starting or growing businesses in trading, manufacturing, services, and more. Whether you're a tailor, cafe owner, or shopkeeper, Mudra makes it easier to turn your ideas into income.

FAQs

1. Can I get a Mudra loan if I don’t have a registered business?

Yes. You can apply as an individual if you have a valid business idea and the necessary documents like ID proof, address proof, and bank statements. Some lenders may ask for a small business registration, but it's not always required.

2. Do I need a guarantor or security for a Mudra loan?

No. Mudra loans are collateral-free, which means you don’t need to give any security or bring a guarantor. The scheme is made for easy access to credit.

3. Can students or homemakers apply for a Mudra loan?

Yes, if they have a business plan or are already running a small business. For example, a homemaker running a tiffin service or a student starting a freelance service can apply under the Shishu category.

4. Can I apply for a second Mudra loan after repaying the first?

Yes. If you repay your first loan on time, you can apply for a higher category loan later. For example, you can move from Shishu to Kishor, and later to Tarun or Tarun Plus, depending on your growth.
 

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LoansJagat Team

We are a team of writers, editors, and proofreaders with 15+ years of experience in the finance field. We are your personal finance gurus! But, we will explain everything in simplified language. Our aim is to make personal and business finance easier for you. While we help you upgrade your financial knowledge, why don't you read some of our blogs?