What is Unsecured Business Loan?
An unsecured loan is one where you don’t have to give the bank or other financial institution any security in exchange for the loan. What standards then govern the provision of this kind of loan? How to apply for unsecured business loan in India?
What are the various types of unsecured business loan?
- Term Loan: A term loan refers to any loan that is taken out for a specific amount of time and paid back in set monthly instalments (EMIs). Typically, they are used for one-time necessities like money to buy a building, a piece of machinery, or land. There is no collateral involved, and their terms of employment are brief.
- Line of credit or overdraft: This unsecured business loan in India kind is adaptable and permits multiple withdrawals of funds. For the amount you withdrew, you can pay interest, as is customary for regular commercial payments.
- Working Capital Loan: Based on your credit score and your ability to repay the loan, this form of loan is secured to cover your company’s ongoing costs.
- Payroll Financing: This kind of financing is used to meet a company’s payroll obligations. To be able to pay your employees’ salaries, you need a line of credit. You can turn to lending services like 1 Click Capital for these kinds of loans because they offer you unsecured payroll funding at a low cost ROI.
- Loans through government programs: The Indian government has launched a number of initiatives, such as the Start-up scheme for unsecured business loans for start-ups. Some of the loan programs to help businesses grow in India’s many economic sectors include Mudra Loan, Standup India, Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), and Prime Minister Employment Generation Program (PMEGP). They offer start-ups and small enterprises in India unsecured loans at low interest rates.
What are the features of unsecured business loans?
1. Collateral is not necessary for unsecured loans.
2. The applicant’s creditworthiness and ability to repay the loan are the primary factors the supplier takes into account.
3. In order to qualify for a business loan, most financial institutions require that your company has been in operation for at least two years.
4. Depending on the size and needs of the business, the minimum loan amount is 10,000 INR and the maximum is 50L INR.
5. They have a variable term that can be between one and five years, and occasionally even longer.
What is the unsecured business loan eligibility?
1. If you are an Indian national, that would be ideal.
2. Your age should fall between 24 and 70.
3. The duration of your company’s existence should be at least two years.
4. You should work for yourself, i.e., own a business.
5. You should have a CIBIL score of 685 or better.
What are the Necessary Documents for Unsecured Business loan?
For an unsecured business loan, the lender will need the following documentation from you:
1. KYC records for guarantors and borrowers
2. Bank statements for previous business dealings
3. Records demonstrating your credit history
4. GST returns for the corresponding fiscal year
5. The business’s ownership paperwork, and
6. A list of the partners or shareholders (if applicable)
