An unsecured business loan is a type of funding offered without the applicant having to provide collateral to the bank or NBFCs. When it comes to these unsecured business loans, it depends on the applicant’s financial documents, credit score and income.
The unsecured business loan for a startup can help start a brand new business or manage the business flow without submitting any collateral or security with the bank. As there is no collateral required, the risk factor stays high for the bank or NBFC.
Interest on an unsecured business loan
When it comes to unsecured business loans, the interest rate varies from one bank to the other. It depends upon the applicant’s profile and their business requirements. An unsecured business loan’s interest is based upon different factors like
- An applicant’s financial history
- Credit score
- Repayment capability
- Annual turnovers etc.
Types of unsecured business loans
- Team Loan: Let it be any loan secured or unsecured that is availed for a specific period and needs to be repaired in EMI forms within the defined time frame.
- Working Capital Loan: When it comes to a working capital loan, it can be availed to meet the day-to-day expenses of the business, and it is approved based upon the creditworthiness and repayment capacity of the applicant.
- Overdraft: It is a type of loan or a credit limit assigned by the lender and can be availed in parts defined by the financial institution. However, the interest rate is charged either on the used or availed amount from the sanctioned or assigned credit limit.
- Loans Under Government Schemes: There are various government-initiated loan schemes under which small business owners can avail of business loans at a comparatively lower interest rate. It includes schemes like mudra loan, start-up scheme, stand-up India, credit guarantee fund trust for small and micro-enterprises.
- Micro Loans: When it comes to microloans is generally offered by Micro Finance Institutions to meet instance cash requirements of the borrower. The loan amount is also offered by micro depending upon their business requirements.
- Business credit cards: Any entrepreneurs can also take up business loans against their business credit cards. The lender sanctions the loan amount to meet the working capital requirements.
- Collateral free: It is one of the most obvious advantages when it comes to unsecured business loans is that it is collateral-free. It requires capital to expand in every business, but not all business has an asset to pledge to require such funds. An unsecured business loan is a collateral-free credit that lets you attain all the finances you require without collateral. However, it helps you in making it easier for a small business loan to cater depending upon their financial needs without having any adequate collateral.
- Hassle-free application process: It will keep you away from any hassles for a long and cumbersome application process to cater to collateral-free loans. It is an accelerated process that is one reason why any business owners opt for an unsecured business loan. You can also select an online business loan to keep your paperwork and documentation to a minimum. It is also considered very important because we strive to practice social distancing in a world of covid.
- Fast disbursals: It is often said that an unsecured business loan has a much faster disbursement process than unsecured loans. This is an accelerated process that is one of the top reasons business owners opt for unsecured loans. However, these loans can also help entrepreneurs cater to urgent business requirements and enhance their cash flow positions.
- Flexible Repayment options: The repayment option for unsecured business loans is flexible, giving every entrepreneur an option to select a repayment option to pick a repayment plan that suits their needs. It also helps them avoid unnecessary hassles in the long run and ensures to stay clear of any defaults in the repayment.
- Can boost your credit ratings up: You can easily avail of an unsecured business loan despite having a flattering credit history. It also makes an excellent way to boost your credit ratings. However, repaying a loan does wonders for your credit score and can easily enhance it.
How to apply for an unsecured business loan?
To apply for a business loan, you can check and then compare various loan options suitable for the business requirements. Here are some steps to follow when you are applying for a business loan.
- You must ensure to fill in all the required fields, like the desired loan amount, annual gross salary, employment status, city of residence, collateral type, mobile number.
- Ensure to check the box below to agree on terms and then further click on “Unlock best offers”.
- You can then further mention the company type, nature of business, make industry make a bank account, gross annual profit, full name, gender, residence, pan card, existing EMI, date of birth, email address, pin code, and email address.
- Once you have submitted all the required details, you will receive a call from the bank’s representative, and it will lead to proceeding further with loan formalities.
- And, once your loan application is approved, the approved loan will get disbursed in your mentioned bank account within the defined working days.
This article simply explained everything you need to know about the process for the best unsecured loans and the different options for these types of business loans that are available, and the critical factors you should have in mind.
535 total views, 7 views today
- 11 Tips to Choose an Unsecured Business Loan Today - Aug 4, 2021