A collateral-free business loan provides funds that SME owners can use for hiring staff, purchasing machinery, upgrading equipment, marketing, expanding the workplace, or any other purpose. It is accessible without pledging any asset as security against credit. Since most small and medium-sized business owners do not own ample assets or cannot afford to put their limited assets at stake, they prefer unsecured business loans to get the required funding when needed.
Let’s learn more about collateral-free business loans and how to obtain them in India.
Benefits and Features of Unsecured Business Loans
- No Collateral Requirement: Unlike conventional business loans, unsecured loans do not need applicants to pledge any asset as a security against the credit facility. So, whatever the circumstances are, the business owners do not lose their property, which worsens the situation.
- Competitive Interest Rates: Collateral-free business loans have competitive interest rates due to their high demand and easy availability. A low interest rate business loans allows borrowers to fulfill their commercial and financial goals without touching their cash reserves.
- Minimal Documentation: Most NBFCs, like Clix Capital, offering collateral-free business loans, support online applications with minimal documentation. The documentation requirements often include identity, address, business, income, and KYC details.
- Instant Processing: Since an unsecured business loans does not require any collateral, it leads to simpler and quicker loan processing. Technologically-advanced NBFCs support online processing, allowing loan approval instantly after a quick in-person verification.
- Flexible Repayment Options: Different NBFCs have different tenures for easy loan repayment. Flexible repayment options allow borrowers to make repayments suitable to their financial standing. Depending on their income, they can opt for a shorter or longer repayment tenure to fulfil the loan.
- Online Account Management: Most digitally-advanced NBFCs provide logins to their borrowers enabling easier loan account management. This significantly eases the management and administrative processes, such as calculating EMIs, checking credit scores, paying EMIs, etc.
Eligibility Criteria for Unsecured Business Loans
- Citizenship: Indian citizenship is mandatory to qualify for unsecured business loans.
- Age Limit: Most NBFCs sanction these loans to applicants within a specified age bracket, usually between 21 and 65 years.
- Business Type: The applicant must run a proprietorship, closely held non-listed company, private limited company, or partnership firm in the trading, services, or manufacturing sector.
- Business Vintage: Many lending institutions require the business to function successfully for at least three years.
- Annual Turnover: Most lending institutions have a minimum annual turnover requirement of at least one crore to approve unsecured business loans.
- Credit Score: Each NBFC’s minimum credit score requirement is different. However, a credit score of 750 or above is a decent score to get easy approval at the best business loans interest rate.
Aspiring borrowers who fulfill these eligibility requirements must provide a few necessary documents to support their details. These include the SME owner’s identity proof, address proof, proof of ownership, and financial records.
An unsecured business loans is the most convenient funding option for businesses as they are easy to obtain without pledging any collateral. Many reputable NBFCs offer tailored, hassle-free unsecured loans to SMEs and MSME owners with good credit scores and repayment capacity.
About the Author
Amaira Sharma is finance expert and former business growth strategist who has more than 8+ years experience in the industry, now she helps others to get better financial stability and standards. She loves to write useful tips on personal finance and businesses.
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