Managing a business these days is challenging, given how volatile market conditions can be. However, many businesses are availing loans to take their establishment to the next level. According to the latest press release by Reserve Bank of India (RBI)
, credit to medium industries registered a robust growth at 19% in January 2021 as compared to 2.8% a year ago. It further stated that credit to micro and small industries registered a growth of nearly 1% in the same month as compared to 0.5% a year ago.
Taking a business loan is a natural step when you cannot raise the necessary funds on your own. However, if you are wondering how much collateral you would have to pledge and if the thought of it is making you lose sleep, there is another option - collateral free small business loans.
What is a collateral-free business loan?
A collateral-free loan is a loan given to the borrower without any guarantee. To put it in simpler words, it is when a lender lets you borrow funds at a fixed rate of interest even when you do not pledge any asset or collateral. It is also known as an unsecured business loan
. Also Read: A Handy Guide to Getting a Small Business Loan without Collateral in India What are the top reasons for choosing a business loan without collateral?
The top reason is that you do not have to pledge any collateral. Easy documentation, flexible tenure, low-interest rates, and quick approval are the other main reasons for choosing this type of loan.
What are the eligibility criteria of getting an unsecured business loan?
To reduce your chances of rejection while applying for this loan, make sure that you have calculated your loan eligibility in advance. There are quite a few financial institutions in the market today that have simpler processes in place and assure fast approval.
To fulfil the eligibility criteria for a
collateral-free loan scheme
, you have to be:
- An Indian citizen
- Self-employed
- Between 26-66 years of age
- Ready to provide proof that you have been in business for at least 3 years
Also Read: A Quick Guide To Finding The Right Loan For Your Business Which documents would you require to avail an unsecured business loan?
Make a list of documents you will need, to make the process of approval smooth-sailing. Below is a list that can come in handy:
- Aadhar Card/ Passport/ Driving License
- PAN Card
- Bank account statement of the last 1 year
- Income Tax Returns of the last 3 years
- Check for additional documents with your lender
How do you apply for a no-collateral business loan?
Step 1 Do a thorough research on different lenders. Lean towards well-known and trusted brands.
Step 2 Make sure you are eligible for an unsecured business loan. Details for eligibility are mentioned above.
Step 3 Keep all the necessary documents ready for a hassle-free application process. The documents required are mentioned above.
Step 4 This is the final step and would involve you
filling an application form. Make sure you fill all the details to avoid rejection due to incomplete forms.
Also Read: Business Loan without Collateral: What are the Pros and Cons Things to do to increase your chances of loan approval
- Evaluate and improve your credit history
- Prepare a solid business plan
- Review your company's online presence
- Share your ideas for fund use with your lender
- Choose a trusted lender and the right product
So, if you wish to scale up your business, there is no better time than now. You can do this easily by getting a
business loan without collateral. Make sure you do your homework, compare lenders and loan terms, and opt for a trusted brand.
