Inadequate financing is a key growth restriction for the majority of micro, small, and medium-sized enterprises (MSMEs) and start-ups in India. An unsecured business loan from banks and NBFCs might be the easiest option for startups or small business owners who choose not to mortgage their assets or who lack collateral to pledge to a lender to obtain a fast line of credit.

Since they require minimal documentation, unsecured business loans are preferred by the majority of small firms. Their assets—personal or business—will not be jeopardised in the event of a default. Banks grant unsecured loans depending on a company’s cash flow, credit requirements, and credit history of the business owner.

Interest Rate for Unsecured Business Loans

Financial institutions differ in terms of business loan interest rates and the application process for unsecured business loans. Companies having a strong credit history may be able to negotiate a reduced loan rate. 

The loan size, company history, ability to repay the loan, length of the loan, and yearly turnover are other variables that affect the interest rate. The majority of lenders provide variable periods for repayment, which can be anywhere from one year to three years.

What Are the Benefits of Unsecured Business Loans?

The lack of collateral required for an unsecured business loan is undoubtedly a plus. Putting down security to obtain money is not a concern in this regard. These are some additional advantages that come with obtaining an unsecured business loan.

Quicker Processing Times

In the absence of collateral, the lender simply needs to evaluate the company’s creditworthiness and the profitability of your firm. Additionally, the documentation procedure is minimal. As a result, lenders process your loan more quickly. Following approval of your business loan, you can also benefit from quicker disbursement.

Reasonably Priced EMIs

You can bargain for lower interest rates if you have strong repayment skills. This implies that you can lower the total cost of your loan. Furthermore, prepaying a part of the debt would also help the company to get rid of the loan faster.

Flexible Durations for Repayment

The lender may offer you a payback tenure ranging from one to seven years, depending on the company’s creditworthiness as well as the applicant’s. Longer tenures can be chosen for a lower EMI, or vice versa.

Types Of Unsecured Business Loans

A few examples of unsecured business loans are term loans, microloans, business credit cards, overdrafts, working capital loans, etc. MSMEs and start-ups should select one of these loans based on their capacity to repay the loan as well as its length, purpose, and capital needs.

What is the Eligibility to Apply for an Unsecured Business Loan? 

  1. A maximum age of 65 years of the applicant at loan maturity and a minimum age of 18 years during loan application.
  2. A credit score of at least 750 for the applicant. 
  3. A minimal amount of time during which company activities show profits. The years of the business vintage required differ across banks.
  4. Documentation of a consistent source of income for the applicant and the company. 

Documents Required to Apply for an Unsecured Business Loan 

Faster approval times and less paperwork are associated with unsecured business loans. The documents required to secure such loans are:

  1. The most recent financial statements audited by a chartered accountant.
  2. GST returns for the most recent fiscal year.
  3. A bank statement of all active accounts for the previous six to twelve months.
  4. The ownership or partnership deed and the most recent shareholding list of directors, if applicable; self-attested KYC documents of the borrower and guarantors. 
  5. A self-declaration on running term loans are some of the supporting documents for an unsecured business loan.

How Indifi Can Help to Secure the Best Unsecured Business Loans

With minimal paperwork required and no collateral requirements, Indifi streamlines and expedites the loan application process. In the shortest amount of time, you may apply for a business loan from several lenders using a single online application form. 

Such loans are mostly ideal for e-commerce platforms and small online businesses who need immediate funding to cater to their varied working capital needs.  

An unsecured ecommerce loan will properly meet the changing demands of your business because it is tailored to the needs of online merchants.

Key Takeaway

Numerous banks and other financial organisations in India provide their clients with unsecured business loans. Different lenders have different qualifying requirements and interest rates. They not only provide the SMEs more utilisation options, but also a straightforward and quick distribution procedure. Ecommerce businesses do not have to risk either their company or their assets, which is its greatest benefit.

Before applying for an unsecured business loan,borrowers must carefully consider all of the conditions and guidelines of the loan. Once the benefits and drawbacks have been considered, they should choose the best lending partner for their unsecured business loan.

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