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unsecured debt instrument

The scenario of Unsecured Debt Instruments

What is an unsecured debt instrument?

One of the instrument for lending funds is known as an unsecured debt instrument. It enables the borrowers to raise funds without pledging any asset as collateral. Lenders impose the qualifying requirements for funding the borrowers. The interest rate for these loans fluctuates according to various criteria. It includes the applicant’s credit history and monthly income. 

The unsecured debt interest rate offered by lenders depends on deciding factors such as financials, banking, industry type, and current market fluctuations. As it is unsecured funding the interest rates are at a bit premium as compared to secured funds. 

Unsecured debt Instruments for raising funds include Trade Finance, Term loans, Overdraft, Cash credit, Bill discounting, Factoring, Bank guarantee, LC discounting, CTGSME, and Working Capital loans. This loan type is extensively used by many businesses in India to cover any short-term unforeseen expenses that can occur as they grow.

Global market scenario

After the unprecedented challenges on account of the covid 19 pandemic in both FY 2021 and Q1 FY 2022, the lending landscape in India has shown remarkable recovery for the remaining part of FY 22.

As per the reports, Global Unsecured debt market in 2022-2026 is poised to grow by $ 5. 85 billion during 2022-2026, accelerating at a CAGR of 16%. It also identifies the key driver for the unsecured debt market, i.e. increasing number of SMEs. Unsecured funds are becoming more online and quicker. Advanced technologies are used in the process, leading to a large increase in demand.

Learn more about Covid 19 effect on India Loan Market.

Indian Market Scenario

  • In India, overall business loans provided Rs.621.1 thousand crores in the financial year 2022. Reserve Bank of India showed that bank lending to such companies increased 26% year-on-year in October. Financial companies other than banks also provide loans to such companies. Thus, a total of 11.6 million MSMEs received new loans in FY2022.
  • Unsecured business loans granted by NBFCs also jumped 36% year-on-year in the second quarter of FY23, according to data from the Finance Industry Development Council, an industry body for NBFCs.
  • The average loan made to a medium-sized enterprise stood at Rs. 1.4 crore in the final quarter of FY22. 
  • Loans to small and micro-sized businesses, had a ticket size approximately of Rs.59 lakh and Rs.9 lakh, respectively.

When it comes to the fulfillment of capital market needs, it becomes a more complex and time-consuming process due to the wider range of options available. Therefore ‘The Global unsecured business loans market is bifurcated on the basis of Type of enterprise, Industry Vertical, Enterprise Size, and Region.

Click here to lear more about the scenario of unsecured debt instrument.

In this world of emerging financial trends and the increase in the importance of financial literacy, businesses are able to grow easily and focus on operational expandability due to the easy availability of fund flow. As the awareness of investments and borrowings are available at consumers’ fingertips, the right spread of knowledge helps them to understand the right opportunity to borrow as well as invest so that they can benefit from the spreading availability.

Unsecured Debt Instruments at Terkar Capital

We at Terkar Capital offered a broad range of advanced, tailored, affordable funding solutions hassle-free. We facilitated every possible unsecured debt solution available in the Indian Economy for our clients.

The executives at our firm have received training to streamline the process for easy accessibility for our valuable clients. So, everything concerning understanding the products, and designing the solutions as per requirement till disbursement of the funds. Not only does it end here but we also take care of your repayments and future funding requirements.

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