Unsecured Business Loans: The Complete Guide

If you are a small business owner, you may face several financial challenges at different stages of business. But imagine having the financial flexibility to grow and expand your business at the pace you like, venture into new markets, capitalise on a business opportunity, and invest in modern technology anytime you want. Wondering how is that possible? This is where unsecured business loans for SMEs (small and medium enterprises) come into play. It is a type of credit that you can avail without having to provide any collateral to the lender.

 

In this guide, we discuss the important things you must know about unsecured business loans and understand how they can be a game-changer for growing your business.

 

Understanding Unsecured Business Loan

 

Unsecured business loans are one of the many forms of credit facilities available in India that can be a catalyst for your business growth. Learn more about how these loans work and their features.

 

First and foremost, an unsecured business loan in India stands out from other forms of business credit available to you because of the no-security requirement. Traditionally, when you apply for a business loan, the lender may ask you to provide a security against the amount you want to borrow. This could be real estate property, business machinery or inventory, investment securities, etc.

 

However, in an unsecured business loan, you don’t have any such obligation to pledge an asset to the lender. This means there is zero risk of losing your valuable asset, making it a lucrative proposition for you to get the funds you need for business needs even when you lack or are reluctant to risk your assets.

 

The non-requirement of collateral makes unsecured business loans especially beneficial for SME or start-up business owners. As a small business owner, you may find it slightly more challenging than others to meet the stringent requirements of traditional loans. In such a situation, getting an unsecured business loan can be a real saviour, and you can use the desired funds for any business expenses.

 

You can use the funds to purchase business machinery, invest in Research and Development, hire new staff, increase working capital, etc. However, you must know that the risk of an unsecured business loan is higher for the lenders. To mitigate this risk, lenders generally prefer to lend money only to people who have strong financial credentials and creditworthiness.

 

Lenders assess this based on your business’s credit history, cash flow, business assets, operational history, current debts, etc. Therefore, as a business owner, if you have maintained a good credit profile and have a good cash flow, you will have better chances of getting your unsecured business loan application approved without any hassles.

 

 

Interest rates on unsecured business loan

 

In general, the interest rates on unsecured business loans tend to be a little higher than the secured loans, given the risk that the lenders bear because of no collateral. However, nowadays, many financial institutions in India offer competitive interest rates. You can look for unsecured business loans, NBFC (non-banking financial company), and get the loan easily.

 

One such NBFC is Udyog Plus, which is part of Aditya Birla Finance Limited and offers unsecured business loans for SMEs at interest rates as low as 8% per annum. Remember, the interest rate has a direct impact on the borrowing cost, EMI amount, and affordability.

 

So, as a borrower, it is paramount that you look for a lender that offers business loans at the lowest interest rate and with favourable terms and conditions. This will help you repay the amount without any hassles.

 

Eligibility requirements for Unsecured business loan

 

Nowadays, most financial institutions in India have simple eligibility criteria for unsecured business loans, allowing all small and medium-sized business owners to take advantage of the loan and prosper in their field of business.

 

Although the eligibility criteria may vary from one lender to another, most of them consider basic factors like age, credit score, annual business turnover, credit history, etc. Udyog Plus, one of the leading financial organisations in the SME lending sector, offers a wider range of business loan solutions, and they have simple criteria, including –

 

• You must be aged between 21 and 65 years at the time of applying for the loan
• Your CIBIL score must be more than 675
• You must own a sole proprietorship business enterprise, or you must be an individual owning a business in the trading or service sector

 

Application process for unsecured business loan

 

Applying for an unsecured business loan is quite easy. Although the process may vary from lender to lender, NBFCs like Udyog Plus have a simple process, allowing business owners to access the funds immediately and get on with running business operations smoothly and efficiently.

 

When you look for the best lender to avail an unsecured business loan in India, you must do your research well about different lenders and choose the one that ensures complete transparency in the whole process, i.e., from application to disbursement. Also, the process itself must be simple so that you get the loan approved and get the money faster, preferably the same day.

 

When you are applying for an unsecured business loan with Udyog Plus, you only have to follow four steps –

 

• Step 1 – Visit the official Udyog Plus website, enter your business details and get an instant sanction

   

• Step 2 – Complete the KYC (Know Your Customer) process

   

• Step 3 – Register eNACH and e-sign the agreement

   

• Step 4 – Get disbursement on the same day

 

 

Final word

 

An unsecured business loan is a big boon for all small and medium-sized business entities and start-up businesses looking to get financial support without having to offer any collateral. These loans can be a saviour and help you get the desired funds to fuel your business growth and maintain sufficient cash flow.

 

However, as a borrower, it is paramount that you have a clear understanding of the workings of the unsecured business loan and its intricacies. Also, before you sign the loan offer, you must be aware of the terms and conditions and critical factors like the interest rate, loan duration, charges involved, etc.

 

You can consider exploring the unsecured business loan offered by Udyog Plus, which is known for offering loans at competitive interest rates and with flexible repayment options.