Liquidity crisis and the increased competition among the various financial institutions led to the Indian lenders growing their risk appetite in disbursing unsecured advances.
Unsecured business loans and personal loans together amounted to Rs. 3.29 lakh Crore worth last year, registering a 31.3% growth.
It has been a welcome notion from the borrower’s end, considering the recent trend of disparity between income-expenditure and financial aspirations.
Such consumption spending has been giving way to unsecured short-term credits. These are convenient to repay and come with an attractive rate of interest.
Availing such advances that are well-equipped to enable borrowers to enjoy its multifaceted borrower-friendly features is beneficial. However, availing it requires a prior understanding of the same.
One needs first to understand what unsecured business loan is, what are its examples, pros and cons. This needs to be followed by comparison amongst lenders to settle upon one that best suits their financial requirement.
Table of Contents
1. Definition of unsecured business loans
Unsecured business loans are funding solutions that require no business or personal asset to be kept as collateral. However, considering that such loans do not require a mortgage, lenders are strict about the required credit score of potential borrowers. It is indicative of the credit history of the individual and hence reassures the NBFC about his/her repayment capability.
Additionally, a borrower needs to meet nominal eligibility criteria and produce business loan documents that include –
- Bank account statement of the last month.
- KYC documents.
- Business proof.
- Passport-sized photograph.
- Relevant financial documents.
In addition to these nominal business loan documents, with Business Loans from reputed NBFCs like Bajaj Finserv, borrowers can enjoy multiple added advantages like attractive rates of interest, high-value loan amounts of up to Rs. 30 Lakh, the easy disbursal and swift approval of the loan.
2. Example of unsecured business advances
Approaching reputed financial lenders ensures that individuals can have access to considerable funding via several unsecured business advances. The examples of such collateral-free advances include –
- MSME Loan / SME Loan.
- Business Loans For Women.
- Commercial Loan.
- Working Capital Loan.
- Business Loans for Manufacturers. Traders, Service Enterprise.
- Machinery Loan.
- Startup Business Loans.
- Mudra Loan, etc.
Each of such loans offers its borrowers with considerable funding that would help them to boost a slow-moving business. It would financially cover the expenses involved in –
- Expanding their trade.
- Leasing workspace.
- Maintaining a positive flow of working capital, etc.
3. Pros and cons of unsecured business loan
While collateral-free advances help entrepreneurs in their endeavour to boost their business, one needs to check their pros and cons. It would help them make an informed decision before availing financial aid.
Pros
- Zero collateral required.
- Swift approval of the loan amount.
- Easier and affordable EMIs.
- Timely repayments are convenient and hence helps build a good credit history.
- Comes with a flexible repayment structure.
Cons
Keeping in mind the convenience of the potential applicants, the advances are designed to cater to their financial requirements. However, before availing such advances, one needs to keep in mind the following factors –
- A credit score of 750+
- FOIR well within 50%
- Rate of interest offered
- Required loan amount.
The absence of cons, the presence of a list of pros and benefits makes such unsecured business loan a convenient financial aid for many. Such financing options streamline the business venture endeavours sans straining the budget of entrepreneurs.