Several Benefits of Getting A Business Loan Without Collateral

According to a report shared by the BizFund, over 80% of MSMEs in India are underfinanced or need to seek financial assistance from informal sources. In fact, only a meagre 16% of micro small and medium enterprises have access to formal credit facilities. 

To remedy the situation, several financiers have now made accessing funds like a loan without collateral simpler for small business owners. This helps to keep the process smooth and uninterrupted at all stages.

Nevertheless, to make the most of this funding option, business owners should find out about the accompanying features and benefits of the same. 

Salient features and related benefits of business credits

What sets business loans without collateral apart from secured loan options are the risks linked with it. Since borrowers do not have to pledge any property or high-end equipment as security, these loans are considered a viable funding option for many. For instance, it eliminates the risk of liquidation of said assets by lenders in case of defaults. 

Besides this, the list below highlights the most prominent features that are beneficial for borrowers –

  1. High loan value

Leading financial institutions extend a high loan value to applicants with a sound credit history. Applicants can secure a loan amount of up to Rs.45 lakh to meet their business-oriented requirements with ease. Business owners can then use the funds availed to improve their company’s infrastructure, purchase equipment or raw material, boost working capital or expand operations. 

  1. Competitive rate of interest  

To encourage small and medium business owners, financial institutions extend business credit at competitive rates of interest. Notably, entrepreneurs can secure better terms of service and a lower business loan interest rate if he/she maintains a high CIBIL score, say above 750 and a low credit utilisation ratio. One of the fastest ways to increase the CIBIL score is by repaying credit card bills on time. Also, avoiding applying for multiple loans at once comes in handy for the same purpose. 

  1. Repayment tenor

Typically a business loan without collateral can be availed for a tenor of up to 84 months. This means borrowers have the option to choose a tenor that matches their intent and repayment capability. They can use a business loan EMI calculator to choose a suitable EMI per the interest rate applicable. This practice is acknowledged as an effective way to formulate a sound financial plan and a monthly budget that facilitates easy repayment without straining disposable income. 

  1. Tailor-made loan options

Several financial institutions now offer customised funding options to eligible business owners to account for their business-related expenses. For instance, leading NFBC Bajaj Finserv extends customised business loans for specific requirements or to entities like – 

  • Working capital loans
  • SME and MSME loans
  • Machinery loans
  • Business credit for women

Such financial institutions also provide lucrative benefits like pre-approved offers to help streamline the process of borrowing. In most cases, one can avail this offer on financial products like personal loans and business loans. Check your pre-approved offer now with name and contact details. 

  1. Simple eligibility and documentation 

To help businesses keep their operations running smoothly, several financial institutions have significantly simplified the eligibility requirements. For instance, most leading financiers now require applicants to comply with parameters like the ones elucidated below to qualify for a business loan without collateral –

  • The applicant’s business must have a vintage of 3 years.
  • They must have a clean credit history and a CIBIL score above 750 (the higher, the better).
  • Applicants must have filed last year’s ITR.
  • They should be between 25 years to 65 years of age.

Business owners must note that lending institutions may require them to meet additional requirements to avail credit. Applicants also have to submit a set of documents to back-up their eligibility. Usually, KYC, PAN card, bank and GST statement, alongside proof of business and residential address serves as required documents for business loans. Though business loan without collateral prove beneficial in more than one way, entrepreneurs should be careful when selecting their lender. Ideally, lenders who extend simple repayment terms, competitive business loan interest rates and are transparent about loan charges help make borrowing experience hassle-free.

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