The traditional approach to availing funds by visiting bank branches is close to negligible with online lending of funds taking over, that allows borrowers to select from a variety of lenders and apply business loan online.
The hassle of loan application processing gets reduced dramatically and is assessed on real time. Integration of technology has made easier for the processing of application and accessibility of applicant’s profile.
This further helps one to avail funds in a very short span of time. The eligibility however depends on various factors and loan products also vary in a number of other aspects.
Why unsecured business loans are in demand –
- No Collateral – Unsecured business loans are easy to avail without having the need to provide much documentation and an opportunity to avail fund without pledging their business assets. It provides them with necessary funds to manage their shortcoming of businesses. An entrepreneur can run short of credit and finds it risky to pledge his business as security.
- Faster application process – The application process is quite simple and documentation required is minimal. There are even financial marketplaces where one can compare various loan lenders and their offered rates and choose amongst them. Technology has in many ways have simplified the lives of borrowers. User can now compare various lenders by visiting their websites and apply for the best suited option as per their choice.
- Flexible repayment options – Different loan products have different loan repayment options. New age lenders have made the repayment terms quite flexible and convenient. There are multiple options to choose from for the borrower which allows them to remains stress free while allowing them to concentrate on their business. Most lenders also do not charge on prepayment or foreclosure of the loan. This gives them the freedom to repay the money borrowed without impacting the cash flow position.
- Refraining from sharing ownership – Unsecured business loans saves one from sharing the ownership of business or sacrificing managerial control of his business.
Obtaining funds from investors and venture capitalists requires to share ownership of the business. Also, it takes a lot of convincing on the part of entrepreneur to obtain funds from an investor or venture capitalist.
- Faster Repayment Period – Business owners are offered unsecured business loans as short-term credit, which they are required to repay over within a year or three. The repayment tenure differ from different loan product.
- Variety of loan products – Borrower gets the option to choose from a host of unsecured business loan products such as term loan, overdraft, business line of credit. Hence an entrepreneur can easily have the positive cash flow position by selecting the right loan product.
The online lending of funds in support with the Government of India has further helped entrepreneurs to build their businesses. The loans are offered under several schemes at affordable interest rates and flexible terms and conditions.
Under the Go Digital India scheme the government is encouraging digital payments for SMEs. It has completely changed the way financial institutions and lenders used to function.
Following points to be kept in mind while availing business loan:
- Company description
- Required funds
- Business module
- Management strategies
- Market analysis
- Marketing strategies
- Profit and loss statement
- Complete set of financial statements
Business lending are of several types. An entrepreneur looking for funds can choose any, from the below mentioned list according to their needs and requirement.
- Term loans – Few owners of businesses opt for term loan to funds the requirement of businesses. The term loan differ in categories of tenure, interest rate and eligibility criteria.
- POS based loans – It enables entrepreneurs to avail credit based on monthly sale routed through POS machines. It can also be availed by payment from debit or credit cards.
- Invoice discounting – The invoice discounting enables business owners to fund working capital needs by availing credit against unpaid invoices or goods received notes. Up to, 80% credit of the unpaid invoices can be availed before the due date.
- Working capital loans: This kind of loan is offered to businesses for buying inventory, recruiting skilled employees and modernizing business processes.
- Business line of credit – Many owners prefer business line of credit which offers flexible ways of repayment and availability. But usually it is extended to established businesses with excellent credit score and strong credit history.
- Invoice discounting – The invoice discounting enables business owners to fund working capital needs by availing credit against unpaid invoices or goods received notes. Up to 80% credit of the unpaid invoices can be availed before the due date.
A major percentage of businesses prefer unsecured business loans over secured businesses where they are not required to pledge any security or collateral.
