For businesses, large, medium, or small, a competitive environment helps in catalysing growth. In the last few years, small businesses have witnessed a surge, especially with changing consumer needs. One of the biggest challenges they face is the lack of timely funds. This financial hurdle leads to several Small and Medium Enterprises (SME) shutting shop, or they fail to realise their full potential.
Short-Term financing acts as a saviour to overcome this challenge! Several small businesses opt for an unsecured short-term business loan that can be availed without any security in terms of a valuable asset, unlike in the case of a secured business loan. The borrower no longer needs to stress about producing documents of any asset or property, while applying for this type of loan.
Generally, these collateral-free loans are dependent on the CIBIL score as well as the size of the business. Besides, the eligibility put out by each lender is different. In most cases, this is what the eligibility criteria look like:
- A minimum of two years of business vintage
- A turnover of at least INR 10 lakhs in the last one year
Another advantage of these loans is that you do not have to produce much documentation. In case you do not repay the loan on time, the lender cannot seize your assets or property until he gets permission from the court.
Let us understand how short-term financing can help small businesses:
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It kicks start the Growth Process
If you are reeling under a financial crisis, your business can crash or might witness slow growth. Adequate funds are required to ensure the proper functioning of your business – right from purchasing inventory, paying your staff, or settling utility bills. That’s not all – sometimes, one may incur unexpected expenses as well. In such cases, an unsecured business loan can help to meet small business needs. The process takes only a few days so that you can take care of your concerns as quickly as possible!
Lesser Risk Profile
In the case of an unsecured business loan, the risk profile is quite low. Since it is a collateral-free loan, the borrower does not have to put his assets under the custody of the e-lender, if he plans to avail the loan. Small businesses can benefit from short term financing since most of them lack these assets against which they can apply for the loan. Besides, since it is free from any collateral, you get a sense of security.
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Eligibility Criteria Are Not Too Stringent
When an SME applies for a long-term business loan from a traditional lender, the eligibility criterion is generally stringent, which makes it difficult to avail the funds. The best option for small businesses is to opt for unsecured loans, which are simpler to get and do not require too much documentation. The processing is quick, as well!
Flexible Repayment Options
There’s another reason for small businesses to opt for unsecured loans – flexible repayment options! The loan tenure ranges from 12 to 24 months, so you have enough time to make a sound financial plan and repay the loan. You need to repay the amount every month. With this feature, a borrower can repay the loan in a stress-free manner, while opting for an unsecured business loan.
Unrestricted Financing
An unsecured business loan is similar to a personal loan, which means you can use these loans for anything related to your business. If you go for a secured loan, you need to specify to the lender about the exact usage of the borrowed amount. Also, the lender has the authority to reject the loan application, in case he is not satisfied with the usage. Thankfully, in the case of an unsecured loan, the borrower decides on the usage of money, and the lender does not interfere.
Improves Credit Score
For most business loans, a high credit score is mandatory. In the case of an unsecured SME loan without collateral, you need to meet specific eligibility, set by the lender. That does not mean you can have a bad credit history, but rather that these alternative lenders do not entirely depend on the CIBIL score. They also consider other details of the borrower, such as bank transactions.
An unsecured business loan also helps in improving the credit score. If a borrower repays all his debts on time, it will help him in enhancing his score and getting a more significant loan amount in the long run.
How to apply for an Unsecured Business Loan?
Once you’ve decided to opt for an unsecured SME loan, these are the next steps:
- Apply Online: You can log on to the website of your chosen lender or download their app to apply for a business loan – it’s that simple! The best part is you can do it at the click of a button while sitting at home or in your office.
- Upload your Documents: The next step is to upload the soft copies of all the documents required by your lender. You can share PDFs of the required documents to help speed up the application process. The best part is you do not have to go anywhere physically to get your application processed.
- Track your Application: Once you have submitted all the documents, you need to wait for a few days to get your application approved! In the meantime, you can track the progress of your application on the website or app. You can know about the progress of your application, and how long it’s going to take! The lenders keep you informed about the status of your loan application through SMSs and emails.
- Disbursal of the Loan: After the lender verifies your application form and documents, the amount will be credited to your account within a few days.
- Notification on the Upcoming EMIs: Once the unsecured loan is issued, you have to pay EMIs every month. The app will inform you about the due date of the forthcoming EMIs. This will help you remember when it’s time to pay up! A missed EMI can downgrade your credit score and will also save you from incurring a penalty.
- Check Outstanding Balance: A business owner can keep track of the outstanding balance and avail the account statement on the app or website.
With so many features in tow, it’s undoubtedly a good idea to opt for short-term financing today! After all, every step you take leads you to your dream.
