As a small business owner, you might be already aware of how difficult it can be to avail a loan by pledging collateral or an asset. Moreover, taking a secured loan means putting your asset at risk in case you cannot make the repayment on time. This is where an unsecured business loan can come to your rescue as you do not need to provide any collateral for this. Read on to know more about this kind of loan and 4 concrete reasons why you should go for it.
What Is an Unsecured Business Loan?
As mentioned before, an unsecured business loan is essentially a financing instrument through which you can borrow a certain amount of money for investing in your business, without having to pledge any collateral or asset.
Along with this, most business loans without collateral in India come with a variety of business-friendly features such as instant disbursal, competitive rates of interest and flexible repayment options, which make them attractive and affordable for many.
However, do note that while it is not necessary to pledge any asset for this loan, you need to have a decent credit score and a sound business plan to get speedy approval.
ALSO READ: 5 Features That Make Unsecured Business Loans Favourable for Your Business
Why Should You Take an Unsecured Business Loan?
Now that you understand the meaning of an unsecured business loan, let us look at some of the key benefits it offers:
1. Faster Approval
One of the most advantageous features of a loan for business without security is its fast approval. Since you do not need to pledge any asset or collateral to the lender to avail the loan amount, the lender will solely rely on your credit score to assess your creditworthiness and grant you the loan. They will not need to spend time on evaluating your asset. And with credit rating agencies making it easier for lenders to understand the creditworthiness of any borrower, unsecured loans are getting approved fast now, which means that you will get the money in your account at the time when you need it the most.
2. Build Your Credit History
Availing a collateral free loan for new businesses can have a positive impact on your credit score too. This means, if you are a responsible borrower and you can make your repayments on time, your credit score will grow significantly, making it easier for you in the future to get more loans for your business.
Having a good credit score is crucial not only because it allows you to access loans faster, but also ensures that you foster responsible financial habits in the long run.
ALSO READ: A Quick Guide To Finding The Right Loan For Your Business
3. Competitive Rates of Interest
One common misconception associated with business loans is that they come with high rates of interest. But, thanks to the rapid growth and development of the lending industry in India, more financial institutions these days are equipped with expert technology to analyse and predict the exact risk associated with a loan offer, thus having the ability to offer better rates to the borrower.
Along with this, since India is witnessing a steady rise in the number of lenders, fair competition is being enforced, thus further lowering the rate of interest for the borrower.
4. Flexible Borrowing and Repayment
Last but not least, most MSME loans without collateral come with a flexible borrowing and repayment plan. This means that at the beginning itself, the lender will approve a credit line for your business based on your previous credit history, and you can secure funds as and when needed through this pre-approved credit line. One of the most significant benefits of this system is the fact that you can borrow as much or as less as you need and you will only need to pay interest on the amount you borrow and not the entire credit line.
Along with this, most lenders also offer the added advantage of a flexible repayment plan wherein you can take advantage of longer tenures and choose the date of repayment along with the EMI amount.
ALSO READ: SECURED V/S UNSECURED LOANS - WHICH LOAN IS RIGHT FOR YOU
To conclude
Availing an unsecured business loan from the right lender can not only allow you to invest in your business and take it to new heights, but also make sure that your financial worries are at bay. And now that you know about all the benefits of getting an unsecured business loan for your small business, go ahead and apply for one today.
