Gone are the days when a business owner had to run from a desk to another to get his loan application approved. And if an individual does not have an asset to back the loan amount, then it would be nearly impossible to get a loan. But in recent years, a new set of opportunities has opened for business owners who don’t have collateral. They can avail an unsecured business loan. The business loan eligibility for these loans is also easy to meet.
The collateral-free business loans liberate the business owner from the risk of hypothecating an asset. The processing time is also reduced as the time required for the valuation of hypothecated asset is eliminated. One of the most common ways to be eligible for an unsecured loan is to have business registration under MSME.
Why Unsecured Business Loan Is Becoming Every MSME’s First Choice?
Several NBFCs sanction business loans without collateral. To be eligible for an NBFC business loan, the applicant needs to meet their business loan eligibility. That said, there is no universal list of eligibility criteria that every NBFC follows. Everyone has different eligibility list that needs to be fulfilled by the borrower. Now let’s take a look at a common list of business loan eligibility required by most loan lenders:
IT Returns
IT returns for at least last year should be more than 1.5 lakhs. It will explain the income and source of income in the past year. IT will assure the lender that the business will be able to generate enough funds to repay the loan.
Good Credit Score
Lenders offering business loans without security require the business owner to have a good credit score. If the applicant has promising creditworthiness, then he ought to generate funds in the future to repay the loan. Therefore, a higher credit score helps in getting the loan application approved. The following things can help you maintain a good score:
- Timely paying off debt
- Keep the credit card usage low
- Paying the suppliers regularly
- Not mixing personal and business finances
- Correcting the wrongly entered entry in the report
Notably, a good credit score does not only influence the loan lender’s decision. But it is also helpful in the long run. Therefore, the business owner should ensure that he maintains a healthy credit score.
Business Vintage
Business vintage is the number of years for which the business is operating. NBFCs generally don’t offer unsecured business loans to start-ups as they can’t prove their income. With the business vintage of at least two years, the business owner can show his ITR and bank statement to prove his income.
Project Report
A project report provides an in-depth analysis of the project in the form is a document. It states the requirement of the business, which may include:
- Raw materials
- Machinery or equipment requirements
- Marketing costs
- Manpower needs
- Land & building requirement
The points mentioned above are the common requirements of most of the NBFCs. That said, when a businessman or a company decides to avail a business loan, he must analyse all the requirements, search for the best loan, and then pick the most suitable loan product for the business.
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