Basic Finance Care Finance tips
Running a startup is not easy and we couldn’t agree with you more on this. From turning that groundbreaking idea into its working model to hiring the right team, there are challenges awaiting an entrepreneur in every corner. Most startups shut shop as they are not equipped with the required working capital or fail to raise immediate money in times of need due to the rigid and non-flexible methods of conventional lending sources.
With Unsecured business loans, entrepreneurs can be equipped to counter adversities or bridge the gap in working capital.
What is an Unsecured Business loan?
As the name suggests, this is a form of lending where the applicant will not have to produce any securities/property as a collateral, unlike a secured loan. This form of lending heavily relies on the credit score of the applicant to check his/her eligibility. But as there is no collateral offered by the applicants, the rate of Interest in this scheme of lending is generally higher when compared to secure loans. In this, the lender is aware of the risk and hence levies a higher rate of interest.
Here are 7 properties of an unsecured business loan that make it the best bet for your startup:
Flexible eligibility criteria:
Unsecured Business Loans and its rate of interest are purely calculated by a lender on the basis of credits scores of the applicants. With a good credit score and good transaction history, it will neither be a difficult nor a time taking task for applicants to get an unsecured business loan disbursed into their accounts.
For an eligibility, the applicant should possess a proof of Identity, Proof of residence, proof of age, and proof of Income. That’s not all, this form of lending is applicable to early age entrepreneurs who are 25 years and older to seasoned veterans under 65.
No collateral required:
Unlike Term loans or other forms of secured loans, entrepreneurs are not required to offer collateral in terms of property or fixed deposits. Not all entrepreneurs have or wish to place their physical assets for as collateral. That said, in terms of non-payment, the lender has the option to hire a fund collection agency or ask the applicant to appear in the court of law.
No guarantor required:
Unlike traditional models of lending, with unsecured business loans, the applicant will not have to produce a guarantor to bear the grunt of repayment in the case of non-payment by the applicant. This is another factor that contributes to the high rate of Interest by the lender. With this, the entrepreneur will be able to raise funds in times of emergencies without having dependence.
Quick processing time:
The time taken to process an unsecured business loan is almost immediate. While, some lenders take longer intervals to roll out the request internally and disburse the funds, the maximum time promised is 3 business days and more than often, they are processed on the same day of application.
Flexible loan amount:
The lending range of unsecured business loans is diverse and flexible to meet the needs of the applicants. Ranging from three to twenty-five lakh rupees, the disbursement of these loans depends on the credit score and transactions of the applicant with banks. Higher the credit score, higher the chance to get a hefty amount. That said, these options really come in handy for entrepreneurs during those tight intervals.
Flexible repayment options:
With unsecured business loans, applicants are provided with a plethora of repayment options that are tailor-made to suit their needs. The duration of repayment is generally between 12 to 36 months. The applicant can choose to repay the loan in the form of Equated Monthly Installments (EMI) or pay them in a quarterly manner according to the nature of their business.
Cater to ad-hoc financial needs:
Running a startup and hustling through the havoc to see a product succeed in this competitive cutting-edge market is the dream of every entrepreneur and unsecured business loans help them realize it in the event of an emergency. While entrepreneurs have the option of a bank on venture capitalists to raise money in exchange for stocks or equity, unsecured business loans give them the opportunity to address the financial crunch without giving away a lot.
While it is largely debated that unsecured business loans have an alarming rate of Interest, it is justified by the number of risk lenders take while lending a considerable amount of capital purely on the basis of the applicant’s credit score without any property as collateral for safety if things go south.
With its flexible payment, eligibility criteria and vast margin of lending, unsecured business loans rule the market as the preferred model for budding and seasoned entrepreneurs.
