Before we plunge into this amazing and fruitful post, let’s answer a few yes/no type questions.
- Is your business facing financial stress?
- Are you seeking how to get a startup loan without collateral security?
- Are you seeking to grow your business with unsecured business loan?
Are all of your answers giving a yes? Perfectly great! Then you are in the perfect place. This is what this post will take you through.
Unsecured business loans are often stated as the Signature or Personal Loans. This is a kind of loan that is completely based on the credit score of the borrower and his/her pledge to pay off the loan.
As it can be understood by the term itself, a business loan with unsecured nature which refers that it has nothing to do with collateral or any sort of physical asset. Moneylenders typically sanction such sorts of loans to those borrowers who possess excellent credit score and demonstrate a low risk of defaulting.
Although, these unsecured business loans stand out with higher risk for the lenders as there is no asset or property to get back the loan if the borrower defaults.
Moneylenders extend these unsecured business loans with the confidence that borrowers will repay them as per the agreed terms. It is completed dependent upon the borrower’s credit reliability which is determined on the basis of 5 C’s of Credit:
- Capacity
- Collateral
- Character
- Capital and,
- Conditions.
It is vital to know that unsecured business loans in India require no guarantee/collateral/security from the applicant. You should comprehend every side of the unsecured business loan before applying and figure out how it functions, what alternatives are available, and how you can meet for the same.
Without moving hither and thither, let’s plunge into those 4 easy and seamless steps which would help you out to avail the best unsecured business loan in India.
4 steps to choose the best unsecured business loan
Step-1: Know how an unsecured business loan works
The first and foremost step you have to follow is to know all about an unsecured business loan alongside how it functions.
Since the term defines itself, an unsecured business loan is approved on the basis of the credit score of the business as well as its performance, instead of any collateral or security or guarantee of the physical asset.
You need to understand every aspect of unsecured business loan so that afterwards it will be handy and helpful for you to compare varying offers.
Step-2: Behold different unsecured business loan options
Since unsecured business loan options are little in number, therefore, you are required to check out all of them to come up with the optimal choice.
You need to understand this, there is not another thought that financing a company can be hazardous since there is no guarantee of any business and when it occurs to offering unsecured business loans, the risk multiplies to next extent.
Various companies end up opting for the wrong type of alternative which can later build a problem for them. Behold all the possible unsecured loan choices at your end such as personal loans, small business credit cards, etc.
Personal Loans: These loans are typically taken in use for start-up financing since these are smaller and comes along with the lesser rates of interest.
Small Business Credit Cards: Small business credit cards are affordable and come along rewards that you on using your cards each month.
Step-3: Check your eligibility
Checking your eligibility is another crucial step to avail an instant loan for business. If you are not qualifying the eligibility criteria of the lender, it can be difficult for you to take out a loan since your application will not be approved. Thereby, foremost, it is suggested to check your eligibility prior to applying for an unsecured business loan.
There are certain parameters that you will have to take into account while deciding your eligibility. However, we have drawn 2 most important components to be considered by you since moneylender also consider these:
Individual Credit Score: Credit Score is the most critical element that every business must figure out prior to applying for the loans. The higher the credit score you will possess; more are the chances of taking out the business loans without collateral security.
Creative Business Plan: There is plenty of organizations that do not possess a precise business plan, by reason of which, moneylenders do not wish to extend them unsecured loans.
Therefore, it is also vital for any business to be ready with a well-structured business plan with exact financial projections.
Step-4: Apply for the loan
Yeah! That’s the last step you have to follow in order to avail the best unsecured business loan. Once you mark the appropriate moneylender who has decided that you are capable to repay the loan amount potentially then do not lose the time, just apply for the business loan as soon as possible.
It is suggested that you behold the paperwork procedure as well and apply for the loan that demands the minimal paperwork. Significantly, there are 4 types of unsecured business loans in India. These are as follows:
- Short-term loans
- Machinery loans
- Business loans
- Working capital loans
Where to apply for the loan?
Well, since you are already known to the aforementioned steps to get the best unsecured business loan in India, you must have got the idea to avail the loan. Of course! There are various traditional banks, NBFCs and fintech lenders who extend unsecured business loans.
To apply for the loan, you may visit the official portal or app (varies from lender to lender) of the particular moneylender and apply accordingly.
Conclusion
Just like an individual’s life is uncertain and unpredictable, a business can also face uncertainty. In the times of financial crisis of a business, an unsecured business loan can stand out as its supreme companion to take it out of that certain crisis.
But since everything needs consideration in finance, likewise, an unsecured business loan also needs to be considered while opting for it. Aforementioned 4 steps will help you out in choosing the best business loan without collateral security.
