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How to Qualify for a Non-Collateral Loan: A Step-by-Step Approach

Finance is critical for successfully setting up, maintaining, and growing a business. Several times, you may require additional financing to grab an opportunity, cover an urgent expense, or sustain operations during off-seasons. Whatever the reason, a non-collateral loan for businesses can be extremely helpful. It is a Business Loan you may borrow without providing any collateral, security, or guarantor. Lending institutions sanction these loans based on the applicant’s credit history, financial condition, and repayment capacity. 

Below, we will share top insights about these loans and how to qualify for one.

Understanding What is a Non-Collateral Loan

Non-collateral loans, also known as unsecured loans, are loan products that allow applicants to borrow capital without putting any asset as security. Many reputed lending companies in India offer these loans to credible business owners. If you fulfil the eligibility criteria for an unsecured loan application for a small business, lenders can provide you with a Business Loan based on your credit score, income statement, financial documents, etc. Generally, small business owners with no or limited assets borrow these loans to fulfil their business-related expenses.

Fulfilling the Unsecured Business Loan Eligibility Conditions 

Almost all types of business entities, including Sole Proprietorships, Partnership Firms, Private Limited Companies, Public Limited Companies, and Limited Liability Partnerships, are eligible to apply for a small business loan. Moreover, the company should not fall under the excluded or blacklisted list for SBA finance, and the enterprise should not be located in a list of negative physical locations. For final qualification, the loan provider will expect successful business operations and a decent turnover for the last few months.

Documents Required for a Non-Collateral Loan for Business

If you are eligible for the loan, you must collect and submit a few documents to prove your eligibility and qualifications. Here is a list of some necessary documents:

  • Bank statements
  • Individual and company PAN card 
  • Partnership deed 
  • Business registration proof, like Business Registration Certificate, GST filing, Gumastadhara, Trade License, Drug License, TIN, VAT registration

Online Application Procedure to Apply for an Unsecured Business Loan

The loan application for the small business procedure involves the following steps:

  • Fill out an online application form with your personal, financial, and business details.
  • After receiving a loan offer, upload the necessary documents online.
  • Let the verification process complete, after which you will receive loan approval and disbursal quickly.

Availing the Benefits of Borrowing a No-Collateral Loan 

Let’s look at the key advantages of borrowing a no-collateral loan for business:

  • Faster Processing: When you apply for a secured loan, the lender must verify the asset’s worth before approving. The exercise required extra time, delaying the approval process unnecessarily. However, approving an unsecured loan is much faster due to the minimal documentation and formalities involved.
  • Easy Finance to Applicants With No Assets: If you are a new business, you might not have sizeable assets to pledge as security against a loan. That is when a collateral-free loan comes as a feasible funding option. If you have a decent credit score and cash inflow, you can apply for a loan even if you don’t have any substantial assets.
  • No Risk to Existing Assets: Secured loans put your pledged assets at risk if you miss the loan EMIs for several months or fail to repay the loan. In case of a default, the lender has the legal right to seize your property and sell it to recoup their money. However, an unsecured loan does not put any such risk to your assets. The lender may take legal action against you, but they don’t have any right over your property.
  • Efficient Handling of Critical Situations: An unsecured loan can be the fastest financial source when you need funds to cover a sudden expense. With an ample loan amount disbursed in a few hours, you may ensure the business does not come to a standstill even during a financial shortage.
  • An Opportunity to Build the Credit Score: Borrowing an unsecured loan and repaying its EMIs on time will improve your credit score over time. As the rating improves, your chances of getting bigger loans at lower interest rates also improve. So, if you have business expansion plans in the future, obtain a non collateral loan now, stick to its repayment schedule, and improve your eligibility for future loans.
  • Flexible Repayment: Unsecured loans for business offer convenient repayment terms according to the borrower’s repayment capacity. When you apply for an unsecured Business Loan, use a Business Loan EMI calculator to choose a repayment tenure with EMIs you can easily afford. This way, you can repay the loan and build your credit score without stressing your budget. 

When you need capital for your business, Business Loans are often the first funding options that come to your mind. However, opt for a no-collateral loan instead of pledging your assets as security against the required funds. These are flexible funding options with easy eligibility conditions and minimal documentation requirements. Just fill out an online application form to apply and get the required funding shortly.

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