For small business owners and entrepreneurs in India, arranging funds is one of the biggest challenges. Two popular options often come up — Mudra Loan under the Pradhan Mantri Mudra Yojana (PMMY) and regular Business Loans from banks or NBFCs. While both provide financial support, they work differently and suit different needs. Let’s compare them so you can decide which is better for your business.
1. Purpose of Loan
Mudra Loan: Designed specifically for micro and small enterprises, shopkeepers, artisans, small manufacturers, and service units.
Business Loan: Can be taken by startups, SMEs, and even established companies for expansion, working capital, or large investments.
2. Loan Amount
Mudra Loan: Available in three categories — Shishu (up to ₹50,000), Kishor (₹50,000–₹5 lakh), and Tarun (₹5 lakh–₹10 lakh).
Business Loan: Amounts usually start from ₹1 lakh and can go up to several crores, depending on eligibility and lender.
3. Eligibility
Mudra Loan: Focused on non-corporate, non-farm small businesses. No need for high credit history.
Business Loan: Requires strong financial records, CIBIL score, and in some cases collateral.
4. Interest Rates
Mudra Loan: Generally lower and subsidized because it is a government-backed scheme.
Business Loan: Interest rates vary widely based on credit profile, lender type (bank or NBFC), and loan category.
5. Collateral Requirement
Mudra Loan: No collateral required; it is unsecured and government-supported.
Business Loan: Can be either secured (with property, machinery, etc.) or unsecured depending on the lender’s policy.
6. Processing Time
Mudra Loan: Faster processing for small-ticket loans but limited in amount.
Business Loan: May take longer due to heavy documentation, but now with digital processes and AI, approvals are becoming faster.
Which One Should You Choose?
If you are a micro or small business owner needing up to ₹10 lakh without heavy documentation, Mudra Loan is ideal.
If your business needs larger funds for expansion, machinery, or long-term growth, a Business Loan from NBFCs or banks is better.
CapitalBox Guidance
At CapitalBox, we help entrepreneurs understand their funding needs and connect them with the right option. Whether it’s applying for a Mudra Loan under government schemes or arranging a larger Business Loan through NBFC partners, our consultancy ensures you get the right support, faster approvals, and secure processing.