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Unsecured Business Loans

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    Unsecured Business Loans

    Unsecured business loans are a type of business loan without collateral. Various businesses take this loan widely in India to meet the short-term discrepancies that can arise as businesses advance forward. Lack of machinery, worker payments, pending bills, and buying new stock are just some of the short-term hassles which occur. Unsecured business loans are named after the nature of the conduct. That is no availability of collateral. Yes!! the collateral security is absent. Hence, this loan is termed an unsecured business loan.

    In the Indian market, being a developing nation, small to medium to big businesses exist here. Without proper financial arrangements, small and medium businesses struggles. Thus, it can impact the overall profitability of the country’s economy. To counter this issue and exterminate the economic decline, banks, lending firms, and financial institutions provide unsecured business loans. Lending the businesses without collateral causes the interest rates to go higher and the loan duration shrinks.

    Documents Required:

    Like every other financial procedure, obtaining an unsecured business loan also involves documentation. This is extremely important. The documentation can act as a major factor in the success of obtaining this loan. The availability of documentation determines the duration of the procedure.

    Here are some of the necessary documents which are essential for obtaining unsecured funding:

    • Identity documents  –  Aadhar card, PAN card, Driving license, Voter ID, Passport, etc
    • Address proofs  – Ration card, electricity bill, lease agreement, trade license, passport, tax invoices, etc.
    • Financial documents  -  Bank statement, CIBIL, business bank statement, asset count, etc.

    Advantages of Unsecured Business Loans

    1. Requires minimal documentation
    2. Fast approval
    3. No collateral is required, as the name suggests
    4. You can get an edge with a good credit score
    5. Justifies the short-term fund requirement

    Types of Business loans

    The basic types of loans in a bigger picture are:

    1. Secured business loans
    2. Unsecured business loans

    In secured business loans, the borrower must present collateral security. For example, A considerably large amount of loan is required for let’s say- asset renovation, or payment of debts, and the security that a company has is property. So, the company can mortgage this property and obtain a loan against its property to fulfill its financial obligations. This was an example of a secured business loan. There are a lot of other secured business loans in India as well. The common thing among all of them is, it involves collateral security. Only then the loan is provided. Generally, in secured business loans, the tenure of the loan is more. Also, the interest rates are less. But in unsecured funding, this is the exact opposite.

    For unsecured business Funding, collateral security is absent. Thus based on the CIBIL score and overall profile of the borrowing company, businesses get the needed funding. Here the interest rates are higher. Since no security, and the loan tenure is fixed, not flexible.

    Get your CIBIL score report here. 

    Features of Unsecured Business Loans

    There are a few features of unsecured business funding. We felt like mentioning features such as fast disbursement of funds when applied. Fast disbursement of funds is because of new hassles involving the procedure for collateral security treatment. Since it only relies on track record and application, the loan is disbursed faster.

    Interest rates are relatively high. Because of no security involvement, NBFCs and financial institutions keep the interest rates slightly higher than secured business loans. That too after the negotiations. It also depends on the various firm. Whether they want to decrease the interest rate and at the same time decrease the loan tenure as well. But, since the procedure is usually quick, and disbursement of the funds is fast, the unsecured loan is a great option for small and medium industries to flourish in the competitive Indian commercial environment.

    Another feature of Unsecured business loans is that they can be obtained, and the repayment can be made through EMIs. The interest rate applies to all the EMIs, be it a 3-months span or a 5-months span. Ultimately, the business that requires unsecured business funding can advance further with comfort.

    Eligibility criteria:

    The eligibility depends on the lending firms or their usual way of conduct. Most of the time, the eligibility criteria for obtaining unsecured funding are kept similar by the financial lending institutions. A CIBIL score of over 750 is required in most cases. The ages of the applicants must be between 25–55. Again, this is not applicable to all financial institutions. The minimum turnover of the business matters a lot. It must be 40 lakh INR or 50 lakh INR depending on the lending institution.

    Interest rate Benefits:

    There are generally two types of interest structures. They are fixed interest rates and floating interest rates. In a fixed interest rate structure, the amount of EMI remains constantly the same. On a floating interest rate structure, the interest is calculated on the balance amount.

    The process to avail of an Unsecured Business Loan

    Why choose an unsecured business loan?

    An unsecured business loan helps in overcome day to day operational financial needs of the company. Like asset renovation, and vendor payments. Sometimes there are other financial discrepancies that arise in the economic paradigm like the introduction of an exclusive taxation system. Businesses can use an unsecured loan to address such unlikely or unexpected circumstances. Every economy faces a cyclical slowdown at some point or the other. At the ground level; small and medium businesses face issues. They struggle to keep the business going due to factors like no funds to buy more raw materials.

    Due to the times of cyclical slowdown, collateral becomes an important factor in providing loans. However, unsecured loans in India can be obtained without the availability of the same. It can cure short-term discrepancies to address long-term developments in the future.

    It also involves business-friendly conditions. So that the borrowing party doesn’t fall into debt. The repayment is completed smoothly. Because once an unsecured business loan is obtained and the financial disruptions are addressed, the company gets back on track and generates more profit. Thus ultimately pays off the loan amount to the lending institution. The business is saved and the NBFC earned its share as well. This proves that unsecured funding is a viable option to consider.

    Why Terkar Capital?

    Terkar Capital is one such financial firm, that provides hassle-free unsecured funding. We are one of the most modernized and highly specialized unsecured business loan facilitators in India. The executives are trained to speed up the procedure and assist in compiling the documentation. The borrower will be explained everything about the loan till the repayment plan. So, once the picture is clear at both ends, only then does the unsecured funding procedure commences.