Small businesses that desire capital or business loans for their growth have always looked at banks as the only ray of hope. The downside to this is that banks usually don’t offer a loan for business without security. It has always discouraged the small businesses from applying for a loan with banks and other financial institutions. The loan amount a small business can get by any bank depends on the value of the collateral being hypothecated. So, the business loan amount is limited only to the amount of the asset.

It is not the case with NBFCs who offer a loan for business without security. Any small business, SME or MSME, is eligible for getting a collateral-free business loan. However, they surely need to fulfil certain eligibility criteria and provide the necessary documents.

Documents Required

  • PAN card
  • ITR of previous 1-2 years
  • Account statement of the last nine months

Here’s Why Unsecured Business Loans Are Better Than Secured Loans

Once these documents are verified and the business loan is approved, anyone can get a business loan with the amount getting credited within a few working days in their bank account. You can use am EMI calculator to get an understanding of the financial details.

The business owner must also have few criteria satisfied to ensure that the loan is sanctioned faster compared to other businesses applying for the same.

See also  Tips On How To Create A Successful Call Centre Business

Eligibility Criteria

  • Age between 25 years to 55 years
  • The business should be registered
  • Should have a history of profit in the past two years
  • The positive trend in turnover
  • The loan should be applied for current business only whose account statement can be being furnished.
  • Address and residence proof
  • Income tax return of previous 1-2 years
  • Bank statement of the past nine months

Any new business follows a conservative path of knocking on the door of any bank for a loan. But that’s a tedious process which takes up a lot of valuable time. However, NBFCs are a blessing in disguise for these small businesses which have a hassle-free, fast-paced mentality. It is one of the biggest reasons why NBFCs are becoming a newfound popular options amongst SMEs and MSMEs.

NBFC gives loan ranging from an amount of 1 to 5 lakhs within a few working days of the loan getting approved. Also, they require minimal documentation. NBFC’s easy and flexible nature has helped its cause of becoming the preferable option amongst start-ups and small businesses in India.

Apply for MSME Loan

To obtain collateral-free business loans, businesses should have a healthy credit score. Businesses need to have a clean prior credit rating before applying for a new loan. A bad credit score does not mean that they’ll not get a loan, but it does affect the credibility, which in turn makes them get a loan at a much higher rate of interest.

See also  Business Loan Mistakes To Avoid

A business can easily increase its credit score by reducing the credit utilization ratio. Credit utilization ratio amounts up to about 30% to 35% of the credit score. The ratio reflects the amount of debt business is carrying about the amount of available credit. If this exceeds 25%, then the credit score gets affected. Before applying for the loan, one should try to repay as much loan as possible to improve their credit score and become eligible for a collateral-free loan at a much lower interest rate.

Want to read the latest posts on social media? Then follow us on Facebook, Twitter, and LinkedIn!