Needless to say, the current economy has put every business firm in a tough position. While the start-ups require proper funding to put their plans into action, the renowned companies need an influx of funds to maximise their productivity, expand their operations and most importantly, ensure survival.
Although you can always opt for traditional modes of borrowing money, they may not be able to meet your needs within the required timeframe. Hence, in such situations, nothing can serve you better than an unsecured loan.
Especially for SMEs or small and medium enterprises that do not have an asset to use as collateral to generate a large sum of money, unsecured business loans might be just the right choice.
These days, entrepreneurs have numerous financial institutions at their disposal that offer well-planned and customised unsecured loans, without demanding any asset or security.
In fact, since there are no assets involved, you are likely to quickly seek approval for your application, and at the same time, the lending institutions make sure to transfer the funds as soon as possible.
However, in the case of unsecured loans, the interest rates offered to the borrower are higher than what you receive in secured loans. But if you have a positive credit score and a flawless payment history, then you can always negotiate the terms in your favour.
Do you meet the eligibility criteria or qualify for unsecured loans?
• As per most of the lenders, the age of the applicant should be between 24 to 60 years.
• The credit score should be 650 or above, and you should not have any issue in the past payment history.
• You will be able to seek approval only if your business has minimum 2 years of experience and has been reflecting signs of profitability.
• Before offering you the loan, the lenders minutely examine all your company as well as personal documents to do a background check, and if you fit the criteria, only then your application is approved.
A few advantages of taking unsecured loans
1. No need for collateral
As discussed before, there is no need for you to offer any asset in the form of security or collateral to generate the funds through unsecured business loans.
Also, this way, you do not fear the risk of losing any asset in case of making a fault in the payment cycle, and at the same time, you get to easily improve your credit score.
2. Quick disbursal of funds
Every secured loan approval process takes a lot of time as the lender thoroughly goes through each piece of information provided by you and has to even determine the value of the assets.
But this is not the case with an unsecured form of lending as there are no assets involved, and the lender only considers your payment history, and hence the whole process takes less time.
3. Competitive interest rates
While scouring the markets, you may come across many of the lenders who provide borrower-friendly interest rates to help you in easily repaying the entire loan amount.
In addition, their flexible repayment tenure allows you to select that EMI amount and the tenure period, which can perfectly align with your monthly expenditure plan.
4. No restriction on usage
Another noteworthy benefit of taking an unsecured loan is that you enjoy complete freedom to use the generated funds for any purpose.
Whether you wish to purchase new equipment, stock inventory, hire staff or simply introduce new operations, the lender does not dictate the terms of usage.
5. You get to keep the profits
When you invite a new partner in your business to introduce a large investment, you are not only forced to share a certain percentage of the total profits, but you also lose the sole control of taking decisions as per your choice.
However, you do not face such issues with unsecured loans as the lender simply hands over the money to you, and you retain all the rights to run your company the way you wish to.
Conclusion
Regardless of the size and nature, every business can greatly benefit from unsecured business loans. You just have to do a little bit of research to select that lender who can offer you the loan with favourable terms of the agreement and with a low-interest rate.
Most importantly, you must make sure to read all the details of the loan before signing the papers, in order to avoid any kind of regrets later on.
Also Read – Is An Unsecured Loan The Right Option To Fund The Growth Of Your Business
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