An unsecured business loan is a type of business finance that is availed without any security in terms of a valuable asset, unlike a secured business loan. While availing an unsecured business loan, the borrower is not required to produce the documents of the asset or property.
The amount of the collateral-free business loans depends on the credit score and the size of the business. The business loan eligibility varies from one lender to another. However, most lenders grant a business loan to a business:
- Minimum 2 years of business vintage
- Turnover of at least INR 10 lakhs in the last 12 months
The small business loans without security are offered with minimal documentation. In case of default, the lender cannot seize the asset or property of the borrower to recover the business loan amount until the court permits for it.
Let us now take a look at how unsecured business loans can prove to be the saviour of the small businesses.
The first and obvious benefit of availing a business loan without collateral is that the small business owner is not required to provide any collateral. Since the secured business loans are offered only when the borrower offers a collateral, small businesses often face rejection while availing it. In this sense, an unsecured business loan is a true saviour for small businesses. Availing an unsecured business loan is so easy for them and they are not required to hypothecate any of their assets.
The business loan amount is of no use to the borrower if the funds are not available at the time of need. Another benefit of the business loan without collateral is that they are disbursed fast. With the need of guarantee being nil, the SME business loan can be availed shortly. There are various lending institutions in India which disburse the business loan within a few days. So with speedy disbursal, all the financial needs of the business can be met on time.
You can repay an unsecured business loan in a flexible repayment tenure of 12-24 months. This helps the small business to plan their budget. Thus, these SME loans give flexibility to small business.
A high credit score is an important business loan requirement. But it is not the same for an SME loan without collateral. There are many lending institutions who do not entirely depend on the CIBIL score. They also take into account the other details of the borrower, such as bank transactions. An unsecured business loan also helps in improving the credit score. A borrow can avail a collateral-free business loan and if he repays all his debts on time, it will help him in improving his score.
The secured business loans can be used for the purpose they are availed. However, a business loan without collateral does not have any such restrictions. The borrower can use them to buy machinery, pay wages, or to increase working capital (for any business purpose)
An unsecured business loan with zero guarantee is an SME loan that is designed to meet the various needs of the small business! ZipLoan offers unsecured business loans for small businesses on easy terms and conditions and the best business loan interest rates in the market.