Introduction
What is the most important element of business? It’s simple, capital! Regardless of the size of the business, adequate working capital is essential to keep the show going as a dearth of funds can hinder the daily operations drastically. But every enterprise goes through a phase of cash crunch or simply needs additional capital to expand operations or deliver a huge bulk of orders in a short span of time. In such a scenario, you seek a loan.
While personal loans levy heavy interest rates, secured loans demand collateral to reduce the lender’s risk factor. A business that is already making losses or has little cash reserve cannot really afford to put a valuable asset on the line. So, what can be done? Say hello to Unsecured Business Loans.
What is an unsecured loan?
An unsecured loan is a loan that requires no collateral. The loan is issued based on the borrower’s creditworthiness, which is evaluated by the 5 Cs – character, capacity, capital, collateral, and conditions. In absence of the collateral, the borrower must meet the expectations in other categories. Higher the credit score, better will be the loan terms he/she will get from the lender. Unsecured loans are proving to be a hit with the business owners as these short-term loans don’t demand any guarantee and help business owners take care of their immediate capital requirements like purchasing equipment, paying staff, asset maintenance, expansion etc.
Why opt for an Unsecured Loan to Fund your Business?
1. No collateral
Just to reiterate, unlike secured loans that require an asset as security, no collateral is pledged against an unsecured loan. It eliminates the risk of losing the asset in case of a default. It is the best option especially for those who have no asset to pledge in the first place.
2. More loan band:
In cases of secured loans, the amount of loan sanctioned is about 80-90 % of the collateral’s market value that is being mortgaged. But since there is no collateral involved in unsecured loans, business owners can avail a higher loan amount. Also, such loans can be used for any purpose associated with the business.
3. Quick processing
Financial institutions usually take a lot of time in the processing, documentation, and then verification, in case of traditional loans. But when it comes to unsecured business loans, the flexible eligibility criterion leads to a high approval rate and the loan is quickly sanctioned.
4. Fast funds
When small and medium-sized businesses require funding, they need it almost immediately. For example, if they need capital to deliver an order in the next 10 days, they can’t wait for the lender to take a week to sanction the capital. Businesses will miss the benefit from a new opportunity in such delays. While a traditional loan can take up to 10 days to disburse the capital, in cases of unsecured business loans, business owners can get it in a quick time.
5. Tenure
Since Unsecured Business Loans offer flexible repayment option, the borrower can choose the tenure according to his/her comfort. The tenure of the loan can easily range from six months to three years. There’s a fixed date of repayment every month in other loans and since small business that mostly rely on invoice clearances to maintain its cash flow can get in soup if the payments get delayed. Luckily for them, Unsecured Business Loans come with flexible EMI options and allow the borrower a better chance of paying installments according to his/her convenience.
6. Friendly terms and conditions
Apart from its many advantages, business-friendly terms and provisions like low processing fees and pre-payment charges, auto-renewal of loan amount upon repayment, and no-hidden costs make Unsecured Business Loans a preferred option. One can easily apply for such loans through the online medium and the whole process takes place in a hassle-free manner. It also helps in developing a good and long-term relationship with the lender.
Today, many businesses owe their growth to Unsecured Business Loans. While secured loans come in handy for long-term finance, in case of short-term needs that require immediate funding, the unsecured business loan can be your Man-Friday. With its flexible loan amount, interest rates, repayment options, and many other features, such loans are helping small businesses, especially startups, run their operations without hitting the panic button.
