When starting a new business, you need to secure funds to invest in resources like a space for a new office, registering a business, hiring a workforce, and so much more. Ensuring investors who would fund a handsome amount on your small business might be intimidating as for this, the business idea must be financially promising in the near future. That’s why financial institutions are the best possible option.
Today, the Indian government is helping up-and-coming small and medium scale businesses with term loans or MSME Loans or unsecured business loans. But there are conditions to it; Good credit standing, the company should be profit-making and collateral the asset for the high loan amount.
How is availing of an Unsecured Business Loan more Beneficial?
An unsecured Loan refers to getting credit from a financial institution that lends money to small businesses based on their credit score and income. The business owner does not have to put any asset at stake as collateral.
When it comes to business expansion or getting a loan for a startup, most owners rely on an unsecured business loan. So here are some of the key benefits of getting an unsecured loan for your business:
- Minimal Qualifying Criteria
The qualifying criteria for an unsecured loan are not significantly restricted, but still, one needs to show the income status by providing the bank statement. So, if you are a business owner, you might want to build a consistent monthly income of about 6-12 months. Other than this, you must show your Permanent Account Number (PAN Card) or Unique Identification Number (UID) for verification, and you are all set.
- Fast and Simple Loan Application Procedure
Since there is no collateral involved, it is easy to apply online for a loan. No time is spent on counting the value of assets. The only thing a company needs to show is its monthly sales and operating duration. So when it concerns getting funds as fast as possible, an online unsecured loan is a startup’s best bet because there are chances of securing funds just after 24 hours of applying.
- Less Requirement of Documents
As we already mentioned above, there is no hassle of a lot of paperwork and documentation in case unsecured business loan. If you are applying online, you only need to provide basic details like bank statements and business profit and loss statements. You do not have to take the pain of handling so many documents. You can choose to email the paperwork, and the money will be transferred to your account.
- The flexibility of Using the Fund
A small business might need funds for several practices. So, it doesn’t have to stick to investing the loan amount at a particular place. It is entirely acceptable to use the credit for expanding business or buying assets. There are no restrictions to utilizing the amount when it concerns unsecured loans.
- Entitled to Large Sum
The most significant disadvantage of applying for a secured loan is validating the fund amount with the value of assets. So, you cannot expect to use it for a considerable amount even if you need that sum for your business. However, you have no collateral with unsecured loans, so it becomes easier to avail funding for a considerable amount. But you might have to pay a higher business loan interest rate.
- Flexibility in repayment Time
When it concerns unsecured loans, you can always choose a flexible repayment option. Most of the time, even a good credit scorer finds it challenging to avail loan from the market because of the repayment tenure as the amount is high, and at some point, the sales might not be so good. Hence, Small scale or medium-scale businesses prefer unsecured loans.
The world has gone digital, and the number of people starting small businesses is constantly rising. But not everyone has the savings to kickstart their dream on their own. But with several NBFCs offering unsecured business loans, these aspiring entrepreneurs can think of beginning their business with the ability to buy long-term assets and raise necessary working capital.