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20 Sep

Business Scenarios Where Unsecured Business Loan Can Help You Scale-up

  • By Editorial Team
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Introduction

Adequate Capital is a key factor for the growth of a business. From helping you maintain a healthy cash flow to execute your expansion plans, capital funding can serve many purposes. However, business owners do not always have sufficient reserve cash to invest in the company and seek out financial institutions for funding solutions. These institutions offer different types of loans leaving the business owner in a range of choices. However, which option would be the best to help the business owner scale up? Let us explore how unsecured business loans are the suitable ones in such situations.

What is Unsecured Business Loan?

Unsecured loans are the ones that do not require any collateral. They are sanctioned on basis of the applicant’s creditworthiness, i.e. lenders evaluate the recent track record and growth potential of the business. Many small or upcoming business owners do not have valuable assets to put on the line as collateral. They can get capital funding from an unsecured loan in a quick and hassle-free manner. However, to lower the risk of the lender, these types of loans charge slightly higher interest rates and may require personal guarantees.  

Business Scenarios Best for Unsecured Business Loan

  1. Expansion Plans:

Let’s suppose you run an apparel manufacturing unit and you need to open a new branch in another city or you want to introduce a new product in the market or simply want to move to a bigger office. This would require a significant investment. In such cases, you can opt for an unsecured business loan to fulfil your expansion plans even if you do not have a very high credit score.

  1. Financing Equipment:

Now, with time, your apparel-manufacturing unit will grow, and you will start getting bulk orders. To make sure there is no delay in delivery, you will need the latest machines with enhanced technology that can lower your production cost and time as well as improve the quality of products. Owning such machines and equipment will also keep you ahead of the competition. However, these machines are quite expensive and need to be imported. You can purchase them using unsecured business loans that are disbursed within days. 

  1. Purchasing Inventory:

From the sales point of view, not all seasons are same. For example, apparels generally sell more during festive seasons, but you cannot start producing products based on demand. You need to prepare well in advance. You need to have your stock ready for dispatch when customer request rises. Therefore, during these off seasons when sales are not high, you still need to invest money in procuring raw materials and scale up your business’s inventory. You can simply use unsecured business loans to purchase inventory and stay prepared for a spike in demand. 

  1. Meeting Marketing Expenses:

You may be selling clothes for both kids and adults, both in Indian and western wear, and for all kind of body sizes. However, how will anyone who has not visited your outlet yet know about the expansive range of your clothing line? Well, product visibility is quite vital to enlarge the customer base. Every business owner understands the importance of advertising and marketing strategies, but promoting your brand via print ads, TV commercials, outdoor advertising as well as social media marketing requires a sizable chunk of revenues. If you think that the brand building measures and other forms of marketing campaigns will help you increase the sale of the apparels and earn you more profits, then you should do it soon. To take care of the expenses, you can use unsecured business loans.

  1. Emergency Funding:

In the apparel industry, a fire breakout can cause a lot of damage or inflation can lead to low customer demand. These lean phases arrive due to unforeseen circumstances, but the business owner should always keep a contingency plan ready. In such situations, they need their rainy day funds to wade through troubled waters. You can apply for unsecured business loans to counter such unexpected situations. With the ease of application and the speed with which these loans are sanctioned, they can easily take care of your financial hardships. 

  1. Extra Working Capital:

Like any other manufacturing sector, running an apparel-manufacturing unit will require you to clear pending bills like rent, electricity and water bills, paying salary to the staff, paying the suppliers among many other things. All these are easily managed when you have a positive cash flow, but the dearth of working capital can hamper the daily operations of your company. If, as a business owner, you currently do not have a healthy cash flow to deal with the mounting expenses, you can use unsecured business loans to ensure continuity of operations.  

Conclusion

To figure out if an unsecured loan is the best bet for your business, you first need to be sure about the purpose of the loan and the way it will help you to increase your profits. The additional revenue earned by injecting cash into the business should outweigh the amount paid as interest repayment. A well-thought plan and proper research before approaching the lender will help you secure the kind of loan that will take your business to the next chapter of growth. 

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Did You Know

List of Documents (LOD)

When a debtor applies for a loan, he or she must submit a list of documents for the processing of the loan. This helps the lender to decide if the borrower can fulfill his debt obligations well or not. The list may include identity, address or income proofs, bank statements, guarantor form, tax returns etc. depending on the type of loan.

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