Also known as the Signature or Personal Loans, Unsecured Business Loan is the kind of loan that is entirely based on the borrowers’ credit scores and promise to repay the loan. It has nothing to do with collateral or any physical asset. Lenders usually grant such types of loans to borrowers with outstanding credit score who pose a low risk of defaulting or not abiding by the terms of the loan. These unsecured business loans are highly risky for the lenders since there is no asset or property to recover the loan if the borrower defaults.
Lenders give these unsecured business loans with the confidence that borrowers will pay them back according to the agreed terms. It is based purely on the creditworthiness of the borrower which accessed based on 5 C’s of Credit – Capacity, Collateral, Character, Capital, and Conditions. Some of the common examples of unsecured loans are student loans, consolidation loan, credit card purchase, and personal loans. These types of loans come with short repayment terms and lower borrowing limits.
It is essential to know that unsecured business loans in India need no guarantee/collateral from the borrower. You should understand every aspect of the unsecured business loan, and check out how it works, what the options available are, and how one can qualify for the same. If you need an unsecured business loan contact ZipLoan. They specialise in processing loan requests at a faster rate and disburse the loan amount in just three days. Moreover, they offer tenure for 12 months, 18 months, and 24 months, and the borrower can choose the option that suits their pocket best.
Without further ado, let’s discuss four steps in which one can get Unsecured Business Loans.
4 Steps to Get Unsecured Business Loans
Step1: Check how Unsecured Loans work
Unsecured business loans, as the name suggests, are approved based on the company’s credit score as well as its performance, rather than any collateral or guarantee of the physical asset. However, borrowers are likely to agree to a UCC Lien on their business assets and offer a personal guarantee. Lenders usually require businesses to:
Provide Personal Guarantees of Owners
Lenders require a personal guarantee from owners so that if a business fails to repay the loan, then the borrower will be held personally liable for paying back the loan.
Step 2: Check out your Unsecured Business Loan Options
Unsecured business loan options are few, and thus, you need to evaluate all of them to make the best choice. See, there is no second thought that funding a company can be risky as there is no guarantee of any business, and when it comes to offering unsecured business loans, the risk multiples by manifolds. Several companies end up choosing the wrong option, which can create a problem for them later on. Check out all possible options which include personal loans, credit cards, and an alternate option to these is ROBS.
- Personal Loans: Personal loans are commonly used for start-up funding because these loans are smaller, with the least interest rates.
- Small Business Credit Cards: Small business credit cards are cost-effective and come with rewards that are offered to you for using your cards every month.
- ROBS: It is the best-kept secret for businesses because this is not precisely a loan; instead, it helps to access funds in a tax-deferred retirement account.
Step 3: Find your eligibility
Finding your eligibility is yet another critical step to get an instant loan for a business. If you are not meeting the eligibility of the lender, it can be challenging for you to avail a loan as your application will be rejected. Therefore, it is advised to check your eligibility first before applying for the unsecured business loan. There are some factors that you will have to consider while determining your eligibility.
- Personal Credit Score: Credit Score is the most crucial factor that every company must check out before applying for the loans. The higher the credit score value; the better the chances of getting unsecured business loans.
- Innovative Business Plan: Many companies don’t have an exact business plan, owing to which, lenders don’t want to give them unsecured loans. It is essential for any business to have a well-designed business plan with precise financial projections.
Step 4: Apply for Unsecured Business Loan
Once you find the appropriate lender, who has determined you qualified, then don’t waste time and apply for the best business loan for small business as soon as possible. It is advised to check the paperwork process as well and apply for the loan that requires the least paperwork. There are four major types of the unsecured business loan, namely short-term loans, machinery loans, business loans, and working capital loans.
If you’re looking for the unsecured business loan for your company, then contact ZipLoan and get a loan amount between the ranges from Rs. 1 lakh to Rs. 10 lakhs with minimal documentation, i.e., PAN card, bank statement of last nine months, house or business office address proof, and previous two years’ income tax returns.
Undoubtedly, it can be challenging to find an unsecured business loan for small companies, but there are lots of options available for you to choose from, depending on your creditworthiness and loan requirements. Explore these options and pick the best one that suits your needs in the best possible manner.