Before applying for a business loan, there are a few questions that need to be addressed.
- Why do you need a loan?
- What is the loan amount required to meet your business goals?
- How do you intend to repay the loan?
Once these questions are answered, you would be able to determine the type of business loan you need. For example, if you are struggling to meet up with daily working capital, you may apply for a working capital business loan, if you need new machinery to carry on with production at your small manufacturing unit, you may choose to apply for an equipment loan.
Deciding a purpose for your loan fund will help you find the right type of loan from the appropriate lender. For example, if you need a business loan to satisfy the financial demands of a specific part or process in your company. The lending company ‘A’ might offer this loan at comparatively higher interest rates than lending organization ‘B’.
Deciding and specifying your financial needs to your lender will help the lender figure out the justified amount and tenure of loan which favors both the lender and the borrower in the long run.
After finalizing factors such as loan amount, loan purpose, loan tenure etc. the next step is to figure out if you would like to apply for a secured loan or apply for an unsecured business loan.
An unsecured loan is a collateral free business loan that can be granted to you or your company even without a token of security from the borrower.
Such financing practices offer SME loans without collateral, which help small businesses grow. Most traditional financial organizations refuse to offer loans to companies that cannot deposit any collateral.
This is where unsecured business loans can come to your rescue. Such unsecured business loans have various benefits. Such as-
- An unsecured loan will help you boost your credit score because of the short term financing and lower interest rates that make the repayments easier thereby ruling the scoreboards.
- An unsecured loan will let you retain your assets for future use. As no security is required, the collaterals are intact with owners without any risk of properties being sold if not repaid on time.
- An unsecured might take only a few days to be processed and disbursed. These loans can be applied for by filling out and submitting a form available on the company’s official website with all the necessary details, uploading required documents and attaching photographs. Once the application has been submitted by the borrower and verified by the lender, loans are processed and disbursed within a minimum period.
So how should one apply for an unsecured business loan?
As mentioned before, these days more and more funding institutions are coming up with unsecured loan schemes to appeal to the SME sector that is growing rapidly. You may physically approach one such funding corporation near you, or you may go online and search for a Fintech company that offers such loans. Either way, the process of obtaining an unsecured business loan is fast and depends on minimal paperwork.
Collateral-free business loans are easy to avail as there is no process of collateral evaluation involved. The loans are granted to businesses that have been serving for more than three years. These unsecured business loans help in maintaining the credit history or CIBIL score because of short tenure and low-interest rates that make repayments easier. The assets are kept safe within the organizations. The application process is also simple and hassle-free. Once the application is approved, loans are processed and disbursed quickly that saves time and efforts of an organization.