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Unsecured Business Loans
Unsecured business loans are loans provided without any underlying security or collateral. It is solely provided based on the credit score, credit history, repayment capacity, and business profitability of the borrower. The lender does not have any recourse on the borrower in case of defaults. The interest rates are slightly higher than the secured business loans. The repayment tenure ranges from 1 to 5 years based on the amount of loan and repayment capacity of the borrower.About Unsecured Business Loans
- Types Of Unsecured Business Loans
- Features Of Unsecured Business Loans
- Benefits Of Unsecured Business Loans
- Eligibility For Unsecured Business Loans
- Who Can Avail Unsecured Business Loans
- Documentation For Unsecured Business Loans
- Procedure To Apply For Unsecured Business Loans
- Interest Rates For Unsecured Business Loans
- Charges On Unsecured Business Loans
- Amount Of Unsecured Business Loans
- Difference Between Secured And Unsecured Business Loans
- FAQs Of Unsecured Business Loans
Types Of Unsecured Business Loans
- Term loans - Useful for capital-intensive investments like plant and machinery and office equipment.
- Line of credit - It is provided as a limit based on your credit score, repayment history, and profitability of the business. You can draw the loan as and when required.
- Working capital loans
- Microloans
Features Of Unsecured Business Loans
- No collateral or security is required.
- Easy documentation and quick approval.
- Repayment tenure up to 5 years.
- Attractive and affordable interest rates.
Benefits Of Unsecured Business Loans
- Customised loans are available in the category of unsecured business loans.
- Eligible to get an unsecured business loan with an average credit score but with higher interest rates.
- No need to pledge any asset for getting the loan.
- Flexible and longer repayment tenure.
Eligibility For Unsecured Business Loans
- Age between 21 and 65 years.
- Business standing of a minimum of 1 to 3 years depending on the type of loan and financial institution.
- A credit score of 650 or above.
- Consistent profitability and growth record.
Who Can Avail Unsecured Business Loans
Sole proprietor, partnership or LLP firm, a private limited or public limited company Manufacturers, distributors, wholesalers, retailers, traders, commission agents, service providers, consultants, freelancers, professionals anyone can avail of unsecured business loans.
Documentation For Unsecured Business Loans
Proof of Identity | Aadhar card, Driving licence, Passport, Voter ID |
Proof of Address | Aadhar card, Utility bills, Passport |
Proof of Business | Certificate of registration or constitution Latest utility bills Any statutory registration like GST, MSME, PF, and ESI |
Proof of Income | Latest audited financial statements Latest income tax returns Last 6 months’ bank statements GST returns |
Procedure To Apply For Unsecured Business Loans
CreditMantri
Visit Credit Mantri to understand different unsecured business loan products available in the market and check your eligibility for a particular loan.- Browse through the various business loans available
- Click ‘Check Eligibility after choosing the loan you want to apply for,
- Enter the basic details asked on the application page and click “submit”.
- Enter the mobile OTP and understand your eligibility.
Online on the lender’s website
- Choose your preferred lender offering a business loan.
- Visit the lender’s official website and choose the business loan product.
- Provide the basic, business, and income details.
- The lender’s authorised representative will contact you for further steps.
Offline
- You can visit the lender’s branch and make a physical application along with the supporting documents. The loan will be processed on satisfactory perusal of documents and eligibility.
Interest Rates For Unsecured Business Loans
The interest rates for unsecured business loans vary from 9.5% to 36% depending upon the amount of loan and the credit score of the borrower.
Charges On Unsecured Business Loans
Processing charges | 0.5% to 3.5% of the loan amount |
Penal interest | 1.5% to 3.5% of the outstanding amount |
Cheque bounce charges | Rs 1,000 to Rs 1,500 |
Amount Of Unsecured Business Loans
You can get an unsecured business loan from Rs 50,000 to Rs 40 lakhs depending on your credit score, business profile, and repayment history.
Lenders Providing Unsecured Business Loans
- Axis Bank
- HDFC Bank
- Tata Capital
- Bajaj Finserv
- IDFC First Bank
- Hero Fincorp
Difference Between Secured And Unsecured Business Loans
Secured Business Loan | Unsecured Business Loan |
|---|---|
Loan is provided based on an underlying asset or security like a house, gold, investments etc | No collaterals are required for unsecured business loans. |
Low-interest rates | Higher interest rates than secured loans due to underlying risk |
Extended processing time | Quick approval since time need not be spent reviewing asset related documents. |
Loan amount is provided as a percentage on the market value of the asset pledged. | Unsecured business loans are provided based on the credit history of the borrower. |
The lender has recourse to the asset pledged in case of default. | In case of default, the lender is seriously affected and has an adverse impact on the credit score of the borrower. |
The repayment tenure ranges from 5 years to 30 years. | The repayment period is from 1 to 5 years. |
Conclusion
Unsecured business loans are attractive financing options for businesses with minimum fixed assets. The amount of unsecured loans is also attractive compared to secured loans. However, in case of default in repayment of unsecured business loans, the credit score of the borrower is severely affected. Hence the equated monthly instalments of unsecured business loans must be repaid regularly within the repayment tenure.
FAQs Of Unsecured Business Loans
1. What is the repayment tenure for an unsecured business loan?
The repayment tenure can vary between 1 year and 5 years depending on the amount of loan and EMI.
2. My credit score is 600. Can I get an unsecured business loan?
Most lenders prefer a credit score of 650 or above for an unsecured business loan. You can still get a loan but with a higher interest rate.
3. Are startups eligible for unsecured business loans?
Yes. Startups with a viable business plan are eligible for unsecured business loans. The credit profile of the owners or partners or directors is also considered.
4. What is the processing time for unsecured business loans?
It can take from 3 to 5 business days depending on the amount of loan and approval of documents.
5. Where can we get unsecured business loans?
All the major public sector, private sector banks, and non-banking financial corporations are providing unsecured business loans.