Benefits of using an unsecured business loan
Companies are mainly looking for financing options because capital expenditure (Capex) is high. The reason for funding through a unsecured business loan for MSMEs could be to make up for the lack of working capital, to expand into a new geography or to buy modern machinery.
Either a company can opt for equity financing in which it has to list on the stock exchange, but it is a tedious process that has its costs. The alternative is to go into debt in the form of a unsecured business loan which comes with an interest cost.
In this tech-driven age, loan processing takes minutes and many lenders offer online unsecured business loans in india.
These loans are for businesses that cannot afford to pledge their assets, either because they do not have them or simply cannot pledge them.
There are many benefits to take and use unsecured loans:
Minimum Qualification Requirements
There are certain basic conditions that the lender expects the borrower to meet. In business loans, these conditions are very strict, ranging from business history to financial strength.
However, in a unsecured business loan, these conditions are less stringent. You will only be asked to provide your PAN card, business documents and bank account statement.
This is one of the main advantages of using a unsecured business loan for MSMEs. As a borrower, you will not have to post collateral to the lender 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 application processing and loan approval, thus guaranteeing a same day loan.
Unlike traditional loans, you don’t have to physically go to the lender’s office to request a unsecured business loan. The entire application process is completely 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, go for unsecured business loans in india.
Not only is loan application and processing fast, but 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 are the ideal financing option in an emergency.
Most borrowers get the loan amount on the same day they apply.
In the case of expensive business loans, the financial institution usually imposes covenants on the use of the loan amount. Banks verify the proper use of funds during each quarterly inspection and disburse the money in installments instead of 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 tranche, unlike traditional commercial loans.
Paperwork is usually a difficult 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 to get the loan approved.
On the other hand, with unsecured loans for businesses, paperwork is the bare minimum. You can simply upload a predefined set of documents related to your business online, which takes no time.
In business loans offered by banks, borrowers have to pay a fixed amount every month for the duration of the loan.
This amount is the equivalent monthly payment (EMI) calculated based on the amount of the loan, the term of the loan and the interest rate applied by the lender. In one unsecured business loan for MSMEslenders offer repayment flexibility.
Borrowers can select the monthly installment amount based on their projected cash flow. There are also no prepayment penalties and no processing fees for the loan.
One of the first criteria for a business loan is to verify the repayment history of the borrowing company with a credit score.
Banks will not accept a borrower with a history of default or a substandard credit score. However, this is not the case in unsecured loansbecause businesses are eligible for a loan despite having 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 lenders and NBFCs 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 enterprises.
There are several advantages to taking a business loan without collateral, so what are you waiting for? Simply search for the best lender and apply for unsecured business loan.