What is a without collateral loan for business?
Unlike big corporations, small and medium-sized companies have limited sources to finance their businesses. These companies are mostly in private hands and thus cannot raise funds through the stock market. The internal savings might not suffice for their growth and there is a need to raise funds to fuel their expansion. One of the most popular ways these companies can use to finance their business is by obtaining a without collateral loan for business. Here, the business entity is not required to pledge collateral to the lender. These are unsecured and the funds are provided to you based on your credit history.
Unsecured business loan eligibility
The financial institutions can have their separate procedures to determine unsecured business loan eligibility but generally, these borrowers are required to meet the following criteria-
- Age should be within the limits set by financial institutes
- The borrower can be either a self-employed professional such as a Chartered accountant, Company Secretary, Doctor, etc., or a self-employed non-professional such as a retailer, sole proprietor, trader, etc.
- The business of the borrower should be functional for the last 5 years
- The tenure of without collateral loan for business is up to 3 years and the repayment schedule can be adjusted as per the requirements of the borrower.
Documents required for loans without collateral
To get a hassle-free experience while obtaining a loan without collateral, you must have all the documents that are required in the approval process. The documents can vary, based on which lender you have selected for the payments, but a generic list of documents will include the following-
- Latest audited financial statements of your business
- Previous financial year’s GST returns
- List of directors of your company
- Shareholding patterns of directors
- Details of running or existing loans
- KYC documents of borrowers and loan guarantors
Modes to apply for without collateral loan for your business
You can apply for an unsecured business loan through online and offline modes. Once the lender is convinced with your application and finds you eligible, the funds are allocated to your account. You are required to follow a specified process while applying for a without collateral loan for business.
Applying through the online mode
The online process of obtaining a without collateral loan for business is largely convenient. It not only facilitates speedy sanctions of funds but also saves borrowers’ time. The online process can be initiated through the following steps-
- Go to your lender’s website and find the loans without collateral application page
- Read thoroughly the unsecured business loan eligibility criteria before making any further progress
- If you are eligible, you may proceed with the loan application
- Select your loan amount and decide your repayment schedule
- After filling in all the information and submitting the application, you will receive a reference number on your registered number. Make note of it.
- The representatives of the lender’s business will contact you for further process.
- After the information that has been provided by you is validated, the loan offer will be emailed to you. It will contain details such as interest rate, loan amount, and repayment terms.
- Once you accept this offer through the mail, the funds will be credited to your account within 48 hours.
Applying through the offline mode
In this mode, you will get to meet the officials of the lender’s business face to face. You can even negotiate on terms of the loan as you are in direct contact with the lender’s representatives. These persons would assist you in determining your unsecured loan eligibility criteria, although this process is a bit time-consuming. Here, you need to follow the steps given below-
- Find the nearest branch of your preferred lender
- Pay a visit there and inquire about the unsecured loan eligibility criteria and the documentation process.
- Fill out the application form and attach the required documents as indicated. The documents will include KYC proofs and your income proof.
- Mention the loan amount and the preferred tenure of the loan
- Submit the form for the lender’s review
- After checking your risk profile, the lender will contact you and make you an offer
- You can analyze the loan offer, and the terms and conditions that the lender has put into place, and upon your acceptance, the funds will be shortly delivered to your bank account.
Therefore, you must meet certain parameters while applying for an unsecured loan, which you need to check with your lender. You can either fill out an online application or apply for the loan through offline mode. While online mode saves you time and you make business plan, the merit of offline mode is that you can negotiate directly with the loan provider. Also, before accepting the loan offer, consider all terms and conditions that are binding on the loan application.