With the expansion of formal sources of credit, taking loans have become much easier and convenient. But the problem that remains with borrowing from banks is the requirement of a collateral. Collateral is something that is pledged as security, to be forfeited in the event of a default on loan repayment.
As we all know, further investment in working capital is the foremost requirement for growth of a business. Businesses need quick access to finance to meet their working capital requirements at varied times depending on the sector/industry in which they operate. However lack of a collateral to be offered as a security results in most of small businesses being unable to get loans for their business. Sometimes business owners don’t want to offer security as there is a huge mismatch between the sought loan amount and the market value of the collateral. A business owner might not be comfortable mortgaging his house worth INR 30 lacs for a INR 2 Lac business loan.
So, in such situations, an Unsecured Business Loan becomes the best and ideal option. Read on to know more about unsecured business loans.
What are Unsecured Business Loans?
also read: Secured loans Vs unsecured business loans: know the difference
Simply put the term ‘unsecured business loan’ means the type of a loan that doesn’t require any collateral. These collateral-free business loans are an ideal option for small business owners who often do not have collateral to hypothecate but urgently need fund for their business to grow and expand.
The business loans without collateral involve a certain amount of risk as there is no hypothecation of the asset. And so, in case of default by the borrower, the loan lender cannot forfeit the asset to recover his loses. So, this type of loans is usually not offered by banks. The NBFCs and online lenders are willing to take a risk and they offer business loans without security to small business owners.
The business Loan eligibility for collateral-free loans is calculated on the basis of the business cash flows and creditworthiness of the business owner. The loan lender checks the CIBIL score, profit and loss account of the business, and ITR filed by the business owner in the previous year to ascertain the credibility of the businessman.
The documents required for an unsecured loan for business includes last 12 months bank statement, last 2-3 years ITR, PAN card, and residence and business address proof. These loans are usually offered for a shorter term of 1-2 years with fixed monthly repayments called EMIs. Also, since these loans are offered by NBFCs, they do not have any prepayment charges. So, if the businessman wishes to close the loan account before its tenure, he can do so without incurring any penalty or extra cost.
What are the Benefits of Unsecured Loans?
also read: how business registration helps in getting faster business loans?
As discussed earlier, there is no need to hypothecate an asset to avail a collateral-free business loan. However, no need for collateral is the not only benefit of availing this type of loan, but there are also numerous other advantages as well. The following are the advantages of the same:
Online Application: As compared to the secured loans, it takes less time to apply for unsecured loans since NBFCs have an online presence. It only takes a few minutes to fill the online loan application and submit. In addition, the supporting documents for loan application can also be uploaded online.
Processing: For secured loans, the lenders first have to evaluate the value of the collateral to ascertain the loan amount – the loan value is equivalent to that of the collateral. However, no such is the case in unsecured loans and the processing is done comparatively faster.
Eligibility & Documents: The eligibility criteria set by the NBFCs is very basic. They are not very rigid when it comes to the business loan eligibility which makes a loan for business more accessible by small business owners. Also, NBFCs, require a minimal list of documents.
Ziploan (an NBFC registered with RBI) provides unsecured Business Loan of INR 1- 5 Lacs for 1-2 years. One can apply for the Loan at ZipLoan from its official website or by downloading the ZipLoan app on the Google Play Store. Further, ZipLoan customers could keep the track of their next repayment due date and outstanding loan amount using ZipLoan app. The customers who repay their loan on time and show growth in their business become eligible for the additional loan from ZipLoan. Ziploan does not charge any penalty to its borrowers on prepayment of the loan.
So if you need finance to grow your business then look no further. Visit www.ziploan.in to meet your business capital requirements.
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