It has become common for small and medium enterprises to avail business loans to fund their requirements such as expansion and machinery upgrades. Some entrepreneurs apply for loans to even start a business. These days financial institutions are offering loans to businesses with and without security or collateral. Getting approval for such a loan is not difficult if your business meets the eligibility criteria of the lending institution and has all the required documents handy.
Unsecured business loans are very popular due to the speedy processing of applications. However, as the risk is slightly higher for the lender, the unsecured business loan interest rates are likely to be slightly on the higher side compared to that of secured business loans.
Business loans are flexible and can be taken for a wide range of reasons such as paying salaries, expansion, purchase of assets and equipment, upgrading technology, opening new units or warehouses and increasing inventory.
Also Read: Know About the Application Process of Unsecured Business Loan
As for any kind of loan, you will need to submit a few documents when applying for unsecured loans for business. However, it is minimal and there is a quick turnaround time for these loans. You will need:
After going through the above information, if you find that at present your business is not eligible for an unsecured loan, you can try and improve your chances with the following methods:
Since unsecured small business loans are no-collateral finance, audited financial statements assure the lender that the applicant is not falsifying papers. If you want quick approval or an unsecured business loan interest rate at a lower percentage, get your financials audited from a chartered accountant right away.
Whether you are filing your income tax returns or a GST return, make sure you do so before the deadline. When filing your taxes, don't give misleading information in the hopes of receiving a rebate or exemption. Usually, lenders ask you to furnish an ITR of two to three consecutive years before approving your unsecured business loan non-collateral. Therefore, filing on-time returns is important for your loan approval.
Before proceeding with your loan application, lenders are keen to learn more about your business concept. Prepare a well-thought and well-researched business plan. Mention the anticipated revenue numbers, future sales projections, area of investment etc. Remember, a strong business plan is essential for obtaining an unsecured business loan.
If you are burdened with too many debts, whether or not they are related to your business, try to pay them off first. If your credit report shows the loan default or delayed EMI, the lender will either reject your application or charge you with a higher unsecured business loan rate of interest.
Apart from this, ensure all the required documentation including GST returns, registration, list of directors, loans etc are kept handy. If you are a start-up, you can try getting a secured loan at first and then apply for an unsecured loan after three to five years for expansion. MSME business loan interest rate may be slightly lower if you offer some security.
Also Read: Fuel Your Business Growth with Unsecured Business Loans
To receive an unsecured business loan from NBFC, follow the steps outlined below.
Following submission, if your details match the lender's requirement, they will contact you for further proceedings.
Unsecured business loans are a quick and easy way to get additional funds for your business without risking any of your assets. It makes sense to avail it if your business is eligible and you need immediate funds.
Disclaimer: This post was first published on 18 March 2021 and has been updated for the latest information, freshness, and accuracy.
Hero Fincorp offers a wide range of financial products including Personal Loans for personal needs, Business Loans to support business growth, Used Car Loans for purchasing pre-owned vehicles, Two-Wheeler Loans for bike financing, and Loan Against Property for leveraging real estate assets. We provide tailored solutions with quick processing, minimal paperwork, and flexible repayment options for smooth and convenient borrowing experience.