Benefits of using an unsecured business loan
Companies are mainly looking for financing options because capital expenditure (Capex) is high. The reason for funding via a unsecured business loan for MSME could be to fill the working capital shortage, to expand to a new geography or to buy modern machinery. Either a company can go for equity financing where it has to go public, but it’s a tedious process that comes with costs. The other solution is to go into debt in the form of a unsecured business loan that comes with a cost of interest.
In this tech-driven age, loan processing only takes minutes and many lenders are submitting an offer online. unsecured business loans in India. These loans are intended for companies that cannot afford to put their assets as collateral, either because they do not have them or because they cannot simply pledge them as collateral.
There are many benefits to taking and using unsecured loans:
Minimum eligibility requirements
The lender expects the borrower to meet certain basic conditions. In business loans, these conditions are very strict, ranging from company history to solid financial data. However, in a unsecured business loan, these conditions are less strict. You will be asked to provide only your PAN card, business documents and bank statement.
This is one of the main advantages of using a unsecured business loan for MSME. As a borrower, you will not have to give the lender collateral as collateral to reduce credit risk. This advantage makes these loans ideal financing options for start-ups and small and medium-sized enterprises (MSMEs). This feature also saves the time of processing the loan application and approving the loan, thus guaranteeing a same day loan.
Unlike traditional loans, you don’t have to physically go to the lender’s office to apply for a loan. unsecured business loan. The entire application process is fully online, so now you can apply for a loan from the comfort of your couch. The application is not very long and the documents can be submitted online by uploading them to the lender’s website or app. So, if you are in urgent need of funds, opt for unsecured business loans in India.
Not only is the loan application and its processing fast, but the loan disbursement is also faster. The lender will transfer the loan amount to the borrower’s bank account as soon as it is approved. Unsecured business loan interest rate may be slightly higher, but they are the perfect financing option in an emergency. Most borrowers get the loan amount the same day they apply for it.
In the case of expensive business loans, the financial institution usually imposes restrictive covenants regarding the use of the loan amount. Banks check the correct use of funds during each quarterly inspection and pay the money in installments rather than all at once. However, in a unsecured business loan, there are no such restrictions on the use of the loan amount. In addition, the funds are disbursed in a single installment, unlike traditional commercial loans.
Paperwork is usually a tax step in any loan, especially in a business loan with many documents that need to be submitted at different stages. Then begins the series of document rejections for many reasons and then you have to show alternative or updated documents for the loan to be approved. On the other hand, with unsecured loans for businesses, paperwork is the bare minimum. You can simply upload a predefined set of documents relating to your business online in no time.
In commercial loans offered by banks, borrowers have to pay a fixed amount each month for the life of the loan. This amount is the equivalent monthly payment (EMI) calculated according to the amount of the loan, the duration of the loan and the interest rate charged by the lender. In a unsecured business loan for MSME, lenders offer flexibility in repayment. Borrowers can select the amount of the monthly payment based on their expected cash flow. There is also no prepayment penalty and no loan processing fee.
One of the first criteria for a business loan is to check the repayment history of the borrowing company with a credit score. Banks will not entertain a borrower with a history of default or a substandard credit rating. However, this is not the case in unsecured loansbecause businesses are eligible for a loan despite a low credit score. The lender places more emphasis on the profitability of the borrowing company than on its credit history.
That’s all we had for you in this edition of the benefits of using unsecured business loans offered by many direct and NBFC lenders in India. In a word, unsecured business loans in India are a one-stop destination to meet all the financing needs of start-ups, small and medium-sized businesses.
There are several advantages to taking a loan for a business without collateral, so what are you waiting for? Simply search for the best lender and apply for a unsecured business loan.