An unsecured business loan is a type of loan which is widely taken by businesses across India, they obtain this loan to meet their short term discrepancies which arise as the businesses advance forward in their activities, lack of machinery, worker payments, pending bills, buying new stock are just some of the short term hassles which occur.An unsecured business loan is named after its nature of conduct, which is no availability of collateral, yes, the collateral security is absent, and hence, this loan is termed as unsecured business loan. In the Indian market, being a developing nation; small to medium to big businesses exist here, and without proper financial arrangements small and medium businesses struggle, and it impacts the overall profitability of the country’s economy. To counter this issue and exterminate the economic decline; an unsecured business loan is provided by banks, lending firms, financial institutions, etc. Lending the businesses without a collateral causes the interest rates to go higher and the loan duration shrinks.
In the Indian market’s context; there are multiple businesses who need financial leverage in the form of loans to compete in the environment of this country. Lending firms are also part of the NBFC sector which accounts to a big chunk of Indian economy. NBFCs provide various types of loan based on the requirements of the borrowing party and current financial circumstances.
The basic types of loans in a bigger picture are of two types;
In secured business loans the borrower must present the collateral security, for example – If 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, the company can thus, mortgage this property and obtain a loan against their property to fulfil their financial obligations. This was an example of secured business loan, there are a lot of other secured business loans as well, the common thing among all of them is; the collateral security is involved, and then only the loan is provided. Generally, in secured business loans, the tenure of the loan is more and the interest rates are less, in unsecured business loans, this is the exact opposite.
In unsecured business loans, the collateral security is absent, the loan is provided based on the CIBIL score and overall profile of the borrowing company, here the interest rates are higher, since no security, and the loan tenure is fixed, not flexible.
An unsecured business loan helps overcome day to day operational financial needs of the company, like asset renovation, vendor payments, and sometimes there are other financial discrepancies that arise in the economic paradigm like the introduction of an exclusive taxation system. Businesses can use unsecured business loans to address such unlikely or unexpected circumstances. Every economy faces a cyclical slowdown at some point or the other, and 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 material; and that is the reason why an unsecured business loan is so important because, during the times of cyclical slowdown, collateral becomes an important factor for providing loans, however, unsecured business loans 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 don’t fall into the debt, and 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 generate more profit, which 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 an unsecured business loan in the Indian market’s context is a viable option to consider.
There are a few features of unsecured business loans in India, that we felt like mentioning, features such as fast disbursement of funds as soon as the application is made, 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 than other secured business loans.
Interest rates are relatively high, because of no security involvement NBFCs and financial institutions keep the interest rates slightly higher than secured business loans, even after the negotiations. It also depends on firm to 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 loan is a great option for small and medium industries to flourish in the competitive Indian commercial environment.
Another feature of the Unsecured business loan in India is that it can be obtained, and the repayment can be made through EMIs, the interest rate applies on all the EMIs, be it 3-month span or 5-month span. Ultimately, the business who requires an unsecured business loan in India can advance further with comfort, no need for collateral and EMIs involved are the features of unsecured business loans which must be noticed.
Like every other financial procedure, obtaining an unsecured business loan also involves documentation, which is extremely important, documentation can act as a major factor in the success of obtaining this loan, the duration of the procedure can also be determined by the availability of documentation.
Here are some of the necessary documents which are essential for obtaining this loan:
Since this is the modern time, many NBFCs and financial institutions receive the applications through the online medium, it has made the unsecured business loan procedure cost a lesser amount of time.
Unsecured business loan eligibility depends on the lending firms, or their usual way of conduct. Most of the time, the eligibility criteria for obtaining an unsecured business loan in India is kept similar by the financial lending institutions. A CIBIL score of over 750 is required in most cases, and the ages of the applicants must be between 25-55. Again, this is not applicable to all of the financial institutions. Minimum turnover of the business matters a lot, it must be 40 lakh INR or 50 lakh INR depending on the lending institution.
There are generally two types of interest structures, namely; fixed interest rate and floating interest rate. In a fixed interest rate structure, the amount of EMI remains constantly the same. On a floating (reducing) interest rate structure, the interest is calculated on the balance amount.
The minimum annual turnover of the company must be Rs. 50 lacs. The company which falls in this category, or with more turnover are applicable business profile for an unsecured business loan, also the business must be based in India, plus, the bank stability must be 5 months or above depending on the lending institution’s requirements.
Terkar Capital is one such financial firm, that provides hassle-free unsecured business loans in Pune and beyond, it is one of the most modernized and highly specialized unsecured business loan facilitators in India. The executives are well trained to speed up the procedure and assist in compiling the documentation. The borrower has explained everything about the loan till the repayment plan, and then only the procedure commences, once the picture is clear at both ends.
If you have any questions, please do not hesitate to ask us. Please also call us or email us before visiting to make sure that you will be served with our best services.
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