A collateral free loan for an online seller can be a rescuer when he requires additional funds to manage the working capital efficiently and keep his business going. Since online sellers have to often wait for invoice clearance which leads to a gap between the cash flow and outflow. A collateral free loan can be treated as the best option for him. In this blog, we shall discuss what a collateral free loan is, from whom to avail it from, and how to avail it.
What is a Collateral Free Loan?
A collateral is an asset having some measurable financial value. Such as real estate, vehicle, machinery, bonds and debentures, etc. So, a collateral loan is secured with the collateral and is also called the secured business loan. In case the loan seeker is unable to repay the loan, the lender has the right to liquidate the asset or have the permanent possession of the collateral.
On the contrary, a collateral free loan is offered without collateral and is also called an unsecured business loan. Most business owners could not provide collateral or afford to risk their asset. So, they choose to avail a collateral free loan. The collateral free loans are offered for traders, retail traders, online sellers, women entrepreneur, SMEs, MSMEs, etc.
A collateral free loan brings peace of mind for the business owner and opens a number of growth opportunities for him. Also, since there is no need for the evaluation of the value of the collateral hypothecated. This type of business loans is approved and disbursed faster. It can be availed to meet various purposes, such as working capital, capital, machinery, etc. A collateral free loan is offered usually by NBFCs and online lending companies in India.
From whom to avail a Collateral Free Loan?
As said earlier, an unsecured business loan can be availed from an NBFC or online lending company. The banks are usually reluctant in offering a business loan without collateral to the online sellers due to the risk involved. In addition, the NBFCs and online lending companies require minimal document and have basic eligibility criteria.
At present, the best NBFCs in India offer different types of business loans to online sellers including one without collateral. So, you can look forward to avail a loan from them. The following is a generic list of business loan documents required by them:
- PAN card and adhar card
- Last 12-months bank statement of the account linked to the business
- Last 2-3 year ITR filed by the business owner
- Business premises address proof
- Residence address proof of the business owner, partners, etc.
How to Avail a Collateral Free Loan?
The NBFCs and online lending companies are able to provide fast business loans to the online sellers due to their online approach. From applying for a collateral free loan to uploading the required documents, everything is done online. In fact, the loan amount is also transferred online to the borrower’s account. This makes the entire process transparent.
The following are the steps to avail a business loan for online sellers:
Step 1: Apply: You can apply online either on the lender’s website or download their mobile App to apply for business loan online.
Step 2: Documents: Upload the required documents on their website or mobile App.
Step 3: Eligibility Criteria: It is important for you to meet the eligibility criteria to get the loan approved. The following is a common list of business loan eligibility criteria:
- Turnover of INR 10 Lakhs (minimum) in the last 12 months.
- ITR of more than INR 2.5 Lacs in the previous year.
- House or business premises should be owned by the business owner.
- Business place should be separate from the residence of the business owner.
- Business operations (vintage) for at least 2 years.
Step 4: Approval: If everything seems right, the lender will approve your collateral free loan and disburse the approved amount within a few days.