What Are the Benefits of Unsecured Loans for Your Small Business
In India, small and medium businesses (SMBs) generally need collaterals or assets as a guarantee to get loans from financial institutions, especially the traditional ones. Taking a loan from the informal lending sector, instead, entails one to pay higher interest rates that dent one’s profit margins. Thankfully, with the advent of non-traditional technology-driven lending institutions, unsecured loans have now become possible without collateral for SMBs.
Let us take a look at the benefits of unsecured business loans:
No Collateral Needed
One excellent source of cash for your small business is unsecured loans as they do not require any collateral or security. In case the business does not work out or face problems, the owner need not worry about losing assets or the business.
Minimal Qualifying Criteria
Although the qualifying criteria for unsecured business loans are less stringent, you might require proving that you have a stable monthly income. For that you might be asked to furnish the last six to twelve months’ financial statement. You could also be asked to provide your permanent account number (PAN) or unique identification (UID) number. So, as long as you can provide these details, the chances are high for you to get an unsecured loan.
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Quick Funding
Since the lender does not require many documentary evidences, a small unsecured business loanis offered in no time. The approval process is simple, streamlined, and convenient. Besides, you can also fill in the loan application online, which helps you save a lot of time and effort.
Larger Loan Amounts
As no asset acts as collateral and limits the loan size, you can apply for a larger unsecured business loan. Contrarily, if you apply for a secured business loan, you will only get an amount that matches the value of the collateral.
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Generally, financial institutions require you to pay back the loan amount in fixed monthly instalments in a limited time-frame. Many a time, paying back the loan amount proves to be a challenge, even if you qualify for the credit. In such a situation, an unsecured loan could be an ideal solution because these lenders also offer flexible payment solutions.
Long-term Relationships
For small business ventures, some financing arrangements make money available on a revolving basis, known as unsecured line of credit. These arrangements boost the confidence of lender as the borrower has to pay consistently. Once the borrower pays back the loan, the lender could then be encouraged to give the borrower a loan greater in size.
Fewer Restrictions
You can use the amount, availed through an unsecured loan, for any purpose. Be it starting or expanding a business, or acquiring assets, or using it for working capital, you can invest this money without any restrictions.
ALSO READ: Know About the Application Process of Unsecured Business Loan
Less Paperwork
As there is no asset involved, unsecured business loans require less paperwork. At times, people are just required to send a fax or an email of the scanned copies of their last six months’ financial statements to availan unsecured business line of credit for their startups. In case you are applying online, you need to fill in some basic information along with the details, and right after, the lender would transfer the money into the account of the borrower. Unsecured business loans are emerging as the saviour for micro, small and medium enterprises (MSMEs) as well. Recently, a few financial institutions began to offer unsecured loans to MSMEs in the country. With all these benefits and easy availability, you need not worry about investing in your business any more. Unsecured business loan is the one-stop solution of all your money problems.
About Hero Fincorp
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.
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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.