It is undeniable that businesses need the essential funds to survive and grow. For that, getting a loan is sensible when required. There are multiple avenues for a loan like banks, NBFCs, local moneylenders, or even families. However, it gets difficult sometimes for small businesses to get these business loans due to multiple reasons like lengthy procedures, lack of technology, lack of awareness, different criteria, added stress, and of course security or collateral. However, these restrictions shouldn’t affect your dream of growing or expanding your business. So, the best solution for this is for small businesses to take a business loan without security. Another thing to keep in mind with loans without security is that they are popularly known as unsecured loans or smart business loans.
Keep reading to know more about business loans without security!
So, what is so good about these unsecured business loans and how can they help you?
● No collateral/security required
This is the most obvious and important characteristic of an unsecured business loan. This feature makes it the ideal option for Micro, Small and Medium Enterprises (MSMEs) that do not own an asset to keep as collateral. In the case of secured loans, if there is a default on the loan payment, the lender can take over the asset and sell it to recover the loan amount.
● Relaxed criteria for loan approval
Business loans without security are more convenient for small business owners and hence have relaxed criteria for approval. Usually, a lot of NBFCs offer business loans without security as the procedure is quick and gets approved quickly without the excess hassle of documentation. This also leads us to our next point.
● Faster loan processing
As unsecured business loans do not require collateral, the lender does not have to go through the extra documentation and confirm the legitimacy or worthiness of the security. This is why processing is faster which leads to quick loan processing. This convenience for borrowers is also one of the most important reasons why MSMEs choose an unsecured business loan.
● Helps build a credit history
A small business loan can often improve the credit score of your business as it shows that you have an adequate amount of experience. If you are a first-time borrower, lenders are usually more interested in your business financial numbers and business vintage. However, having a good credit history backing you up always helps. You can start this by repaying your EMI on time, which will build your credit score and history.
How to apply for an unsecured business loan?
Even though we understand the requirement of a business loan, the next step after that or the next question is always ‘how to apply for a business loan’.
Let’s understand the process of applying for unsecured business loans and the steps required for it.
The first step is to be aware of the required documents. While the documents change here and there according to the lending company, there are some basic documents that all of them need. These include -
- Complete the application form
- ID/ Business continuity proof
- Bank statement
- Latest ITR along with computation of income
- Passport size photo
- Address proof
- Financial documents
- Proof of ownership
You can apply for an unsecured with HFS by following these easy steps -
1. Call us at your doorstep/ follow our online method on our website HFS
2. Enjoy quick loan approvals
3. Get funds into your accounts
With these three easy steps, you can avail an unsecured business loan with HFS. The process might differ a little for other brands but the key remains the same.
Apply Business loan
What are some important eligibility criteria for unsecured loans?
Businesses have to meet certain parameters to avail a business loan without security. It may change across different financial institutions. However, this is the list of parameters that usually stay standard across all the lenders while applying for an unsecured business loan.
While the age may vary according to the different lenders, usually, the adequate age limit is from 25 to 65 years old.
● Business performance
Your business should be in operation for a minimum of three years.
● Tax return
The business should be filing income tax returns of the business for at least the past 1 year.
● Financial statements
You should have the financial statement of your business for the previous 24 months and the previous year’s turnover, audited by a CA.
The applicant should be a citizen of India and should hold no criminal records.
● Credit score
Your credit score should be healthy as it can lead to better chances of loan approval.
Today, a lot of financial institutions provide business loans. However, the MSME sector often requires a boost to grow their business. For this, a loan without security can be helpful as it does not require collateral and has a quicker approval rate.