Here is All You Need to Know About a Business Loan Without Collateral

Every business owner requires adequate financial support to take their company to greater heights, just the way they always envisioned. However, the lack of readily available funds often forces them to take a step back and wait for the right time to come, which becomes the reason for stagnancy in their growth graph. But this is no longer a problem, as today, the financial institutions offer several interesting loan options from which a business can truly benefit. And one such loan option that has become quite popular these days is an unsecured loan. This is, especially beneficial for those small business owners who do not have an asset to offer in the form of collateral.

A business loan without collateral is provided entirely on the basis of your creditworthiness, and hence, it gets processed quickly, and is less risky as you do not fear losing any asset, in case you fail to make repayments. Although there are several benefits of seeking this loan, you must keep in mind that the lenders usually charge a higher interest rate in case of unsecured loans. But again, if you have a positive credit score, then you automatically become eligible for negotiating terms in your own favour. Also, before settling down for any lender, you must thoroughly scour the markets and compare few accredited loan providers to lock the best deal for yourself.

Although, the eligibility criteria for collateral-free business loans may differ from one lender to another, listed below are the common factors considered by most financial institutions.

• The age of the applicant should be between 24 to 60 years while applying for the loan.

• To seek approval for the loan, your business must have minimum 2 years of experience and should display signs of profitability and stability.

• The credit score should be 650 or above, and you should not have any fault in the past payment cycle.

• The lenders closely examine all the documents, and if you fit the criteria, only then your application is approved.

• Freedom regarding usage – This is one of the most important reasons why every business owner should consider taking an unsecured loan as the lender does not dictate the terms of usage. And the borrower gets the flexibility to use the loan amount for any purpose, whether it is for purchasing new equipment, expanding operations, hiring someone or simply supporting the working capital.

• Favourable repayment structure – Another advantage of taking a business loan without collateral is that you enjoy a long and flexible repayment tenure. The tenure may range from six months to three years, depending on your financial position and the loan amount. In fact, the lenders allow you to make the payments daily, weekly, fortnightly and on a monthly basis. And this way, you get to ensure the growth of your business, without burying yourself under any burden.

• Quick approval process – Every business encounters several emergency funding requirements, and for such situations, an unsecured loan is undoubtedly a boon. The approval process only includes assessing the financial health of the company, monthly sales, repayment capacity and doing a background check. Hence, the approval process does not consume much time and the funds are quickly transferred to your account.

Whether you are in search of a long-term or short-term funding option, taking a business loan without collateral can truly meet all your diverse requirements. Offered without demanding any asset, these loans provide flexibility regarding usage, repayment structure and most importantly, have a quick approval process. You just have to carefully read the terms of agreement, before signing the papers in order to avoid any regrets later on.

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