When it comes to financing a business, getting the right loan is critical. Among the various types of loans available, unsecured business loans are becoming more popular. But what are they, and how are they different from secured loans? Here’s an overview of everything you should know about unsecured business loans.
What is an Unsecured Business Loan?
An unsecured business loan is a sum of money borrowed from a lender for business purposes. The lender does not require you to give up any collateral, and you can repay the loan in Equated Monthly Instalments (EMIs). So, how do lenders approve loans without requiring collateral? When they approve your loan, they consider your repayment ability, which includes your credit history and income. Eligible borrowers can use an Unsecured Business Loan for a variety of purposes, such as starting a new business, expanding it, upgrading machinery, funding working capital, and renovating a business space. Micro, small, and medium-sized enterprises (MSMEs) can benefit from such loans because they may not have a property to pledge as collateral.
Unsecured Business Loans: Features And Benefits
- Financing up to 50 lakhs: For all of your short- and long-term business goals and objectives, you can apply for a business loan with an amount ranging from INR 5 to 50 lakhs. Our short- and long-term business loans are an ideal option for bolstering working capital or covering urgent business expenses.
- Flexible Tenors: Capital offers flexible tenors for its business loans, ranging from 12 to 36 months. This gives you the freedom to adjust payments based on your cash flow.
- Pre-Approved Loan Offers: By taking out these loans, you can qualify for special pre-approved offers such as interest rate reductions on unsecured business loans, top-up loans, etc.
Types of Unsecured Business Loans
- Consumer Loans: MSMEs can purchase equipment for their business space, including computers, laptops, air conditioning, printers, security systems, etc., through a buy-now-pay-later program.
- Term Business Loan: High-value business loans are available without the need for collateral, guarantors, or other security. Repayment of the term loan can take up to four years. You can use the money to meet your company’s demands more quickly.
- Overdraft (OD) Facility: If you own a business account, such as a current account, OD enables you to borrow large amounts of money from your lender. You pay interest on the loan amount you have used for different business purposes when you have a line of credit.
- Loan on Business Credit Card: If you have a business credit card, you may be eligible for pre-approved credit card loans. With this program, the lender uses your credit card transactions and bill payments to pre-approve you for a loan. If approved, the loan amount may be credited to your bank account within a few minutes or hours.
- Government-backed financing schemes: As one of the most important economic sectors, the MSME sector has come into focus. Several credit schemes, including the Credit Guarantee Schemes (CGS), Stand-up India, and the Pradhan Mantri MUDRA Yojana (PMMY), have been introduced by the Indian government to encourage more people to follow their entrepreneurial dreams.
Unsecured Business Loan Eligibility Criteria
- You ought to be in the age range of 21 to 65.
- You should have been running your company for a minimum of three years.
- For the previous year, you ought to have been filing income tax returns for your company.
- Your company’s financial statements for the last 24 months and the turnover from the prior year should be properly audited by a certified public accountant.
- At the time of document verification, additional pertinent financial documents might be needed.
Documents
- Address Proof
- Identity Proof (ID)
- Proof of Ownership
- Financial Documents
- Passport-size photograph
- Completed application form
How to Apply for Unsecured Business Loan?
- Make sure you qualify before applying for an unsecured small business loan in India. SMEs can apply for this loan with us if they have at least five years of experience. Additionally, their credit and financial histories ought to be favorable.
- To apply for a collateral-free business loan, you can go to any bank and apply. After going to the bank, you have to take a form and fill it out.
- After completing the form, you will need to send in supporting documentation such as the most recent audited financial statements, the bank statement for the previous six months, the latest audited credit report, the list of directors, and any applicable shareholding patterns.
- After that, you can select an unsecured business loan amount and term that best suit your needs and the supporting documentation you’ve submitted.
- Lastly, to complete the application, carefully read the terms and conditions before accepting them.
Conclusion
Unsecured business loans, which do not require collateral, are a convenient way to finance your company. These loans provide flexible funding options for a wide range of applications, including cash flow management, machinery upgrades, and expansion. Learn about the benefits of unsecured loans, how they differ from secured loans, and the qualification requirements so you can make sound financial decisions for your company. Learn how to easily set up and grow your business.