Know About the Application Process for Unsecured Business Loan

Businesses, especially small and medium enterprises (SMEs) and even start-ups, often rely on unsecured business finance to fuel growth. The biggest reason is that you do not need to pledge any collateral for this type of loan. Easy documentation, flexible tenure, low interest rates, and quick approval are the other reasons for the growing popularity of unsecured loans. Though the application process for it might vary from one financial institution to another, let us look at the basics of unsecured business loan eligibility and the documentation involved. You will also learn about the advantages of an unsecured business loan for start-ups and other businesses and the application process in detail.

Unsecured Business Loans

In this type of loan, there is no need to pledge collateral as you do in a secured business loan. The loan is issued to the business based on its creditworthiness, health, and cash flow. Business owners who do not have collateral or do not want to put their assets on hold can apply for unsecured business loans for easy access to much-needed capital.
 

Advantages of Unsecured Business Loans

 

1.   Collateral-free:

   There is no need to pledge collateral to apply for this loan. Therefore, you can apply for this loan without risking any of your assets.  

2. Low and Attractive Interest Rates:

   The unsecured business loan interest rate is generally low, especially for those who have good credit scores. The lender can either provide fixed or flexible interest rates. Other factors that will determine the interest rate are business history, loan amount, and loan tenure.

3. Flexible Repayment Tenure:

    The loan tenure is flexible and can range anywhere from 12 months to 36 months.
    

4. Quick Approvals: 

   You can simply apply online for an unsecured business loan. If you meet the eligibility criteria and your documents are in place, then your loan will get approved within 1-2 days.

5. Improve Credit Score: 

   If you have a poor or average credit score, then you can improve it by making timely repayments of your unsecured business loan.  

 Also Read: Is An Unsecured Loan The Right Option To Fund The Growth Of Your Business?
 

Unsecured Loan Application Procedure

 
Before we go through the steps involved in a small business loan application, let's look at some common procedures that you must follow before applying for a business loan.
 

1. Research Lenders:

   As there are many lenders available in the market, you should research each one of them. Apart from checking the lender’s reputation, check what are the offered loan interest rates, tenure, loan amount, and processing fees.

2. Unsecured Business Loan Eligibility:

   Every financial institution has its own set of qualifying criteria. Therefore, read the lender's mandatory eligibility requirements on their website before filling the business loan application form. Some common qualifying criteria for business financing are:
   • Age: Applicants should be an Indian national and must be under the age limit set forth by the financial institution.
   • Occupation:  Self-employed professionals: Chartered Accountants/ Company Secretaries/ Architects/ Doctors
       Self-employed non-professionals: Service Providers/ Traders/ Sole Proprietors/ Manufacturers/ Retailers
      
     Entities: Trusts/ Private Limited Company/ Partnership Firms/ Limited Liability Partnership (LLPs)
      
   • Business Status: If you run a small or medium enterprise, it should have been in operation for at least 5 years.
   • Business Loan Tenure: Business loans are available for up to 3 years with a flexible repayment schedule.

3. Documentation: 

   To apply for an unsecured business loan, you need to prepare all the necessary supporting documents for a hassle-free application process. The better organised these documents are, the faster will be the approval process. The documents required will vary from one lender to another. However, some common documents needed include:
   • Latest Audited Financials
   • GST Returns for Financial Year
   • Latest 6 Months Bank Statement of All Operative Accounts
   • Latest Share Holding Pattern/List of Directors, if Applicable
   • Self-Attested KYC of Business Loan Guarantors and Borrowers
   • Self-Declaration on Running Term Loans/Working Capital Facilities


4. Also Read: Why Unsecured Business Loan is a Better Option For Small Businesses
    

5. Application Form:

   The last step would be to ensure that the application form is duly filled to avoid any rejection due to incomplete forms.

  

Know About the Online Business Loan Application Process

If you wish to apply for an unsecured business loan, the online business loan process is one of the most convenient methods. It not only saves your time but also helps in speedy approval. Here’s how you can initiate a business loan application online: 
 

• Visit your preferred lender website and go to the business loan application page. 
• Read the business loan eligibility criteria and required documentation information available on the website.
• Once the required eligibility suits your profile, fill in mandatory fields on the loan application form and upload the softcopy of the relevant documents.
• Choose your desired unsecured business loan amount and repayment term.
• If your information meets the lender's requirements, they will send you a reference number to your phone number or email address. Make a note of the reference number for future reference.
• Once you receive the reference number, the financial institution representatives will contact you for further information that is necessary for the business loan processing.
• After the lender's representative validates your information, the lender will email you a personalised loan offer that includes the interest rate, loan amount, and other details.
• Once you accept the offer and send your confirmation, the business loan amount will be disbursed to your account with 48 hours. 

 
Also Read: Fuel Your Business Growth with Unsecured Business Loans
 

Know About the Offline Business Loan Application Process

 
Although the offline approach takes a little longer, you will receive better service and have the opportunity to negotiate with branch officials as you interact with them face to face. The offline application process involves the following steps: 
 

• Visit your preferred lender’s nearest branch or outlet.
• Learn about the required eligibility and documentation process from the branch's representative.
• Fill out the offline loan application form and attach the photocopy of the required documents such as income proof, KYC etc. along with the business loan application form.
• Don't forget to mention the desired loan amount and tenure on the application form.
• Post submission of your offline form, the lender will evaluate the risk associated with your profile and will make you an offer accordingly
• Once you agree upon the terms and conditions of the loan offer, the business loan amount will be disbursed to your account shortly. 

To Conclude:

 
Applying for an unsecured business loan is a simple process. However, before making the final submission and to avoid any inconvenience, do a quick review of what you have filled out and the documents you have attached to the business loan application form.

Disclaimer: This post was first published on 23rd October 2020 and has been updated for the latest information, freshness and accuracy.