Most loan lenders ask for security while offering business loans. However, some lenders also offer unsecured business loans that don’t require any security. The unsecured loans for business are aimed to help those business owners who don’t have or don’t want to risk their business or personal property to avail credit.
Let’s take a look at the pros of availing a business loan without collateral:
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Fast
Since there is no asset involved, there’s no need for the lender to send out an assessor to reckon the value of the property. It will save time. Also, many of these business loans can be applied online. The decisions are made in hours, and the loan amount is approved and disbursed within a few days.
No Risk to Assets
First, no collateral means there is no need to hypothecate asset. It means if the worst happens, the personal assets would not be liquidated. Notably, this doesn’t mean the business owner is no longer in trouble, and he does not have to pay. But it is just that the personal assets won’t be the way to get the money.
Secured Loans Vs Unsecured Business Loans: Difference & How It Matters
Easy Eligibility
The eligibility criteria for unsecured business loans are very easy to meet. First, as conveyed earlier, availability of security is no eligibility. Second, since mostly NBFCs offer business loans without security, the NBFCs eligibility is very easy to meet. Their requirements include:
- The business vintage of 2 years
- Last year ITR of more than 2.5 lakhs
- Business turnover of more than ten lakhs
- Business place and the house should be separate
- Either Business place or house should be owned by the business owner
Documentation
The documents required for the unsecured business loans are fewer. Most NBFCs require minimal documents, which include:
- PAN
- Aadhaar card
- Bank statement of the last nine months
- Last 2 years ITR
- Address proof
Terms & Conditions
The terms and conditions for unsecured loans are very customer-friendly. The business owner can easily meet the requirements of the lender. Most lenders also offer flexible repayment tenure; the business owner can choose one that suits his pocket. Or he can also repay the loan amount before its tenure. Notably, while some lenders charge a penalty on prepayment, some do not charge any after the payment of 6 EMIs (excluding pre-EMI).
Availing unsecured business loans are certainly beneficial for small business owners. However, the business owner should consider all important points before choosing the lender to be able to make an informed choice.
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