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Unsecured Business Loan - Know What To Expect During The Application Process

Application Process

 

Introduction

The need for pledging collateral for loans does not work for everyone seeking loans. Not all loans are the same, and not all come with the need to pledge securities. With many businesses launching each year, financiers are competing to offer the best-possible finance solution to business customers. Secured and unsecured loans are the main loan options for businesses.

What is an Unsecured Business Loan?

An unsecured business loan is a type of finance offered to businesses without the borrower requiring to pledge the collateral. Financial institutions offer this type of loan after considering the creditworthiness of the business. This helps businesses that do not want to put their business assets or real estate on hold with the financier gain easy access to capital.

Features

Unsecured business loans come with the following features:

  • Takes less time to get sanctioned:

With many lenders owning an online presence, these loans are approved and processed quickly. Once approved, money is usually disbursed within 48 hours.

  • Will help you build your business credit:

Timely re-payment will help improve the credit score of those with an unsatisfactory credit history and score.

  • Does not require a collateral:

In secured loans, lenders consider the loan-to-value of the asset being pledged, and a certain percentage of the value will be given out as loan amount. With unsecured loans, the lender considers your business health, cash flow, and personal and business creditworthiness to decide the loan amount.

  • Attractive interest rates

Unsecured business loans can have fixed or flexible interest rates, and the decision is mainly dependent on the lender. A fixed-rate loan provides more stability, as it eases the calculation of monthly payments and also helps you figure out your ability to pay that amount. Those with a good credit score can avail loans with attractive interest rates. The other factors that influence the rate of interest are the loan amount, loan tenure, and business history.

  • Flexible Tenure 

Most unsecured loans come with flexible repayment options and tenures. In most cases, the loans are offered for short tenures of up to 3 years, enabling faster pay-off.

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What to expect when applying for an unsecured business loan?

When you finally decide not to temporarily part with your assets, and instead prefer to apply for an unsecured personal loan, other procedures await you before you can avail the funds. However, lenders have eased the way these processes are undertaken. As a borrower, first you need to decide on the required amount. Once you have a figure in mind, do the following:

  1. Look for the right lender

Since your loan amount and eligibility is mainly dependent on the lender you choose, you must choose one wisely and after thorough research. Consider the lender’s reputation, processing times, interest rates, and processing fee, if any.

  1. Check your eligibility

Each lender has different eligibility criteria to approve loans. Shortlist a few reputed lenders and check your eligibility with each one. Go with the financial institutions who offers a good loan amount at an attractive interest rate and allows flexible terms.

  1. Prepare all supporting documents

Keep all the necessary documents ready at hand before approaching a lender. That includes your important business records and documents. Requisites to apply for a loan vary from lender to lender. Having these documents ready will help lenders analyse them faster and render solutions faster.

  1. Be thorough in your application form

Your loan-application form accompanies the list of documents you submit. Ensure you complete the form diligently and carefully to avoid disapprovals.

Following the list of documents you submit and the forms you sign, you need to wait for the lender’s approval, which in most cases, comes about quickly. No matter who you choose, it is important you understand their terms and conditions and the costs involved before going the way of loans.

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Did You Know

Disbursement

The act of paying out money for any kind of transaction is known as disbursement. From a lending perspective this usual implies the transfer of the loan amount to the borrower. It may cover paying to operate a business, dividend payments, cash outflow etc. So if disbursements are more than revenues, then cash flow of an entity is negative, and may indicate possible insolvency.

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