Whether you are a business owner ready to expand the empire or you are a rising entrepreneur all set to launch him/herself in the markets with some unheard business ideas. You may have to equip yourself with a business loan. The money generate through this loan can be use in several forms as on one hand. It can act as your working capital to support the growth of your business. And on the other hand, it can be use for purchasing high-end machinery or equipment to improve the quality of the products and services. For hiring new staff, and for any other activity that can help to take the business to greater heights.
Although the borrowers have the option to choose between unsecured and secured form of financing. An unsecured business finance can particularly prove to be highly beneficial for those who do not have an asset to offer in the form of collateral. The markets these days have several financing institutions that provide these collateral-free business loans. However, due to the possibility of a greater risk. They strictly take your credit worthiness into consideration. Hence, to gain the trust of the lender and to effortlessly seek approval for this loan. You need to have an excellent credit score, flawless payment history, and your business must be running profitably. Moreover, the chances of getting a low interest rate depend entirely on your credit score.
General eligibility conditions required for unsecured business loan
Although the eligibility criteria for unsecured business loans may differ from one lender to another. Here are some common eligibility conditions demanded by every lending institution. And you must make sure to meet them.
- As per most of the lenders, the age of the applicant should be between 24 to 60 years.
- The credit score of the applicant should be 650 or above. And you should not have any flaw in the past payment history.
- You must provide all the required documents such as bank statements, income tax returns. And other documents that can talk about the stability of your business.
- You will be able to seek approval only if your business has minimum 2 years of experience. And has been displaying signs of profitability.
- The lenders will closely examine all your company as well as personal documents to do a background check. And if you meet the criteria, only then your application will get the approval. Once approved, the funds will be quickly transferred in your account.
Also Read: INFT business loan for SMEs and Startups in Singapore
Few ways in which an unsecured loan can be beneficial for your business
- No need to provide a collateral – Just as its name suggests, for unsecured business finance, you do not have to offer any asset in the form of collateral or security to raise the funds. This way, such loans provide you an excellent way to fulfil your diverse business requirements. And at the same time, help you improve your low credit score without fearing the risk of losing any asset.
- You do not lose the rights of your business – When you approach an investor to welcome an influx of funds. You are not only forced to share the possession but you also lose the right to solely take the decisions associated with everyday business matters. On the other hand, this is not the case with an unsecured loan. As the lender does not interfere with how you run your business and all the rights to remain completely with you. And you just have to repay the loan after a certain period decided by the lender.
- You are provided competitive interest rates – The lending markets are flooded with lenders who provide borrower-friendly interest rates to make it easier for the borrowers to repay the entire loan amount. As it is the interest rate which makes a huge difference in the amount of EMI you are asked to pay every month. Moreover, the lenders even offer a flexible repayment structure so that you can get the freedom to choose that tenure period. And EMI amount which can align with your financial condition.
- You experience a quick approval and disbursal process – Since in unsecured loans there is no involvement of any asset or security. The lenders do consume much time to approve your application. Additionally, these minimal number of formalities further result in quick disbursal of funds in your account.
- You enjoy flexibility regarding the usage of the funds – One of the most important benefits of taking an unsecured business loan is that you get to use the funds for any purpose related to your business. From stocking inventory to purchasing machines, or for scaling up the operations. The lender does not impose any restriction on the usage of the funds and allows you to use the money for any business requirement.
- You are assured an uncomplicated and hassle-free application procedure – To provide maximum convenience to the consumers. Many of the lenders have now moved the entire application process online. With this incredible facility, you get to apply for the loan. Even while travelling or sitting in a completely different city, as you no longer have to make an in-person visit to the lender. This is especially beneficial in the current environment. When the government has imposed several restrictions on the movement of the people.
- You can prepay the loan with zero prepayment charges – If you have been able to increase your profits and have sufficient amount of funds at the moment. Then you can also prepay the Unsecured Business Finance, without paying any additional charges. In other words, you may come across many of lenders that do not charge you any money for the foreclosure of the loan. By making prepayment or part payment, you can quickly get rid of the loan ability and the stress associated with it.
How to apply for an unsecured business loan?
- Since there are various lenders available in the markets. It is better to do thorough research about each one of them in order to choose the most reliable lender. Besides doing a background check, you must find out what exactly are the interest rates, tenure periods, loan amounts. And processing fee charged by each one of them.
- The next step is to check the eligibility criteria. Every lender demands different eligibility conditions. And hence, you must check the criteria of several lenders in order to pick that lender. That has the most flexible set of conditions for seeking the approval.
- Before applying for the loan, you have to also equip yourself with all the necessary documents. In order to avoid any kind of hassle later on. These may include the bank statements, latest audited reports, self-attested KYC documents and latest list of shareholders and partners.
- The last step involves carefully filling the application form to reduce the chances of rejection. Before submitting the form and signing the agreement, do a quick check and review the attached documents, and most importantly, read all terms and conditions. Once approve, the loan amount will be disburse in your account within a day or two.
Conclusion
Clearly, unsecured business finance can help the business owners to quickly arrange the required funds, without mortgaging any asset. Such loans are offerering entirely on the basis of the creditworthiness of the borrower and their approval process does not consume much time, making it easier for the borrowers to fund their revolutionary business ideas. To effortlessly apply for the loan, you can follow the simple steps mentioned above, however, before applying, make sure to meet the eligibility criteria.
