A short guide on unsecured business loan
Raising a large amount of capital isn’t that simple. Is it? Well, financial institutions such as banks and NBFCs will stand out as your greatest companion to lift that chunk of capital to stimulate your business since they offer collateral free business loan for startup.
Every existing business requires adequate capital to be stable in the long run. Having adequate amount of capital ensures that the working capital requirements of your business does not get obstructed.
Business loan without collateral security ensures constant payments for your staff, raw materials, opening of a new office, purchasing plant or machinery, etc.
If your business falls under micro, small, and medium enterprises (MSME), business loans in India without security are a boon since you don’t need to give any collateral against securing a loan.
The maximum loan tenure that financial institutions sanction in business loan is 15 years with multiple repayment choices. Actually, unsecured business loan is an ideal solution for enterprises that are willing to take the next jump in their business and require a financial support.
Unsecured Loans stand out ideal for businesses that don’t possess big assets or costly machinery and are in search of funds to initiate or enlarge their business.
Besides banks and NBFCs, there are several other financial institutions that provide unsecured business loans. They can be taken out instantly and are generally of short-term in nature. For instance, the govt. of India itself offers PSB loans in 59 minutes.
Where the usual turnaround time by major banks is 7–8 days, here it comes down to 59 minutes and that is something what makes it special too.
Well, let’s get to know about key features of business loan without collateral/security.
Features of Loan for Business without security Collateral/Security-Free
The first and foremost feature of Business Loan without Collateral Security that you already know is that unsecured business loan doesn’t need any collateral or security. This feature makes it perfect choice for Small and Medium sized enterprises (SMEs) that don’t possess considerable capital.
Relaxed criteria for loan approval
Collateral/Security-Free business loans shift with seamless process. Even NBFCs offer business loans through digital platform to turn it more comfortable for you.
The loan procedure is instant and gets approved instantly without plethora of documentation. As soon as your application gets approved, the loan amount gets credited in your bank account within a few working days.
Higher Rate of Interest
Since lending unsecured business loans is risky for lenders, therefore the rates of interest on it are proposed higher than the secured loans.
Moneylenders often enter into negotiations on the matter of interest rates on the basis of several elements such as loan amount taken, applicant’s annual income, employment status and other information.
Unsecured Business Loan Eligibility
The eligibility criteria may vary from lender to lender. Although, most of the financial institutions consider these fundamental factors prior to approving an application request of unsecured business loan: -
- Age — Applicant’s age should lie anywhere from 21 to 65 years.
- Business existence and performance — Lenders seek how old the business is and how has it performed in past, how is it performing in present and what are the potential performance probabilities of the business.
- Credit Score — This is definitely core and can also be said as the primary factor which the moneylenders consider while sanctioning not only business loan but any other loan. A virtuous credit score has always made a significant impact in loan approval.
Key points to remember
We would like to leave you with a few key points that we guess, you must bear in mind while considering to take out an unsecured business loan.
- Prior to signing the loan contract, you must go through the documents carefully or you can seek the assistance of a financial proficient to perceive the clauses and information of the loan.
- Another point is that you shouldn’t neglect the ROI, check out whether the lender is offering you the loan with fixed or floating interest rate.
- You should also take a look on factors like processing fee, penal charges, stamp duty, foreclosure fee and repayment tenor before signing the loan documents.
If you are a business enthusiast and possess an ideal notion but lacking funds, don’t worry, we have written certain posts on that too to assist you with supremacy, visit our blog section and get to know about collateral free business loan for startup.
Originally published at http://ajitsamal.wordpress.com on October 12, 2020.