small business loan

A Quick Guide to Collateral-Free Small Business Loans in India

Obtaining funds for a new business has become easier than it used to be. However, it’s still tough to catch the investor’s eye, given the growing competition in the start-up space. Funding is a significant challenge for most small businesses in India. Getting a business loan is another exciting way to fund business activities. However, most companies don’t have collateral to get the loan approvals. High-value business loans demand collateral in most cases. However, some new-age financial institutions like Fullerton India offer unsecured business loans to bridge this gap. 

Understanding unsecured business loans

Unsecured business loans help businesses avail of the required financing without demanding collateral. It is an excellent option for small and medium-sized enterprises. However, some eligibility criteria must be fulfilled. It is essential to check for these criteria before applying for unsecured business loans. Different lenders might have varied eligibility requirements. Modern financial institutions don’t have rigid eligibility criteria. One can quickly get a business loan in Bihar online. 

Also Read: 6 Tips Helps you to Save Business Loan Interest Rates

Why choose an unsecured business loan? 

Here’s why you should opt for unsecured business loans.

  • Unsecured business loans can be a game-changer for most small and medium-sized businesses that don’t possess substantial collateral for secured loans. 
  • Since no collateral is involved, the risk is much lower than secured loans.
  • The best online business loans providers have a simple application process that doesn’t require visiting branch offices.
  • Minimum paperwork is involved, and the loan disbursement process is much faster. Apply for a business loan with Fullerton India for the best interest rates.

What Can Prevent You From Securing Small Business Loan

Business loans can greatly support a startup as well as an existing business to grow. Business loan funds can be used to invest in machinery or equipment, hire new staff members or other numerous expenses. To secure such beneficial loans, you should avoid the following roadblocks:

  • Poor credit history: Creditworthiness is the primary factor a lender considers before offering a small business financing option. Lenders consider an applicant’s credit score to determine their credibility. If there is a lack of diligence in repaying previous debts, the lender may reject the loan application.
  • Lack of a solid business plan: Lenders can easily sanction a loan for a well-thought-out plan for your business. A business loan application with a half-baked plan may be rejected.
  • Many loan applications at a time: Individuals should not make many loan applications at once. They should shortlist a few lenders for a SME loan (full form – Small and Medium Enterprise) and pick an offer with the maximum probability of approval. Applying for many loans at a time can be a red flag for credit bureaus.

Avoid any of these activities that can prevent lenders from accepting your small business loan applications.

Self-employed persons, proprietors, partnership firms and private ltd corporations serving in manufacturing, trading or services sectors can apply for these loans. Existing companies need to show their financial statements showing a profit for the past two years. 

If you need a business loan of Rs.50 lakhs, you can get it without collateral against a small business loan. If your requirement is for more funds than Rs.50 lakhs, you can apply for a secured business loan with renowned NBFCs at a lower interest comparatively. 

Must Read: Here’s how SME Loan Benefit Your Business?

What Are The Steps To Get A Small Business Loan?

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Since every business is different, the types, terms, and conditions for the loans vary widely. If your business requires a small business loan, you only need minimal paperwork to avail easy repayments, and attractive interest rates.

Here is a guide for you to understand how to apply for a small business loans:

  1. Understand the requirement: You need to understand your affordability before you apply for a loan, when you need money for short-term needs, estimate your affordability by considering factors like the loan amount, loan term, interest rates, and monthly payments. You need to understand how much capital you can have to fulfil your debt.

  2. Understand Eligibility: It is important to compare various lenders offering small business loans and their eligibility conditions. If you meet the eligibility conditions of a particular lender perfectly, you may be eligible for a loan of a high amount with a low interest rates.

  3. Fill in the application: Most lenders, like Fullerton India, offer online application and disbursal of unsecured business loans. You can submit your application along with required documents online. The lender will get in touch with you to take the process forward. The amount will be disbursed to you electronically upon approval.

Additional Read: 6 Reasons why Small Loans are Good

4 Reasons Unsecured Business Loans Are Getting The Popularity That They Deserve

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Business loans are popular financial instruments. However, getting one isn’t as straightforward as you need to set aside the business plan, financial model, and other relevant documents, provided you are resorting to a conventional approach. However, if you are starting out and do not have collateral to offer, there are several unsecured small business loans to rely on. 

Here are some of the reasons why unsecured small business loans are more popular than the ones procured via the traditional channels:

  • Access to a Sizable Credit Line

An unsecured business loan is more like a high-value personal loan, dependent on the income and credit score. Therefore, if the mentioned metrics are in good health, you can get access to a decent financial consortium to work with.

  • Quick Access Loans

Unsecured business loans are meant to be hassle-free. This is why it is easier to get one in the least possible time and with minimal documentation.

  • Customizable Selections

Loan providers understand the complexity and diversity of business models and ensure credit line customizability to suit the nature of the setup. This means you can either opt for the cash to run the business or even apply for a working capital or machinery loan, as per convenience.

  • Favorable Conditions

This aspect hints at the fact that the unsecured business loan interest rate might be higher but is still lower than the credit cards. Besides, the concerned NBFCs ensure that you get hold of easy repayment schemes to keep the financial sanctity intact.

These are some of the more important reasons that make unsecured business loans highly popular for smaller businesses. 

Additional Read: Applying For a Small Business Loan? Here’s What You Should Know

Does My Small Business Qualify for a Business Loan?

Factors to Consider if You Need a Small Business Loan | Accounting ...

Every business starts small, with the hopes of becoming a global name one day. It requires a lot of effort, constant growth, and funds. While you can take care of the first two by working with qualified professionals, you might need to raise funds. A small business loan can come to your aid in such a case. You can research business loan interest rates, but a few factors decide your eligibility. Here are the basics:

  • Credit Score: It may be risky, but a business loan of a large amount can be granted to you if you have a splendid credit score and a low-interest rate. The lender will see your credit history, the repayment of previous loans, your credit card transactions, and if all this adds up to a minimum CIBIL score of 750, you’re good to go.
  • Cash Flow: A steady and healthy cash flow of your business will assure the lending institution of your capability to repay the loan. So, this is important when deciding your eligibility.
  • Age of Business: Most businesses and start-ups shut down in their first year of operations. Hence, any lending institution requires a steady operational age of at least two years before granting a business loan.
  • Collateral: There are secured and unsecured loans that you can avail of for your business. While unsecured loans do not require any collateral, the borrowing amount reduces. A secured loan can offer you a more significant amount with a lower rate of interest due to the collateral kept on the table.

Keep these in mind when you apply for your small business loan!

Must Read: 5 Tips Women Can Follow to Get an Approval on Business Loan