When a golden business opportunity knocks, but cash is tight, the meaning of an unsecured Business Loan comes to light. It's a sum of money lent to you based on trust without securing it against your property or equipment. This is what an unsecured Business Loan definition boils down to – a chance to embrace business growth without the stress of losing your assets if things get bumpy.
What are unsecured Business Loans?
By definition, an unsecured Business Loan is financing that doesn't ask you to secure the loan against any collateral, like property or equipment. It's an option where the loan's approval hinges on your creditworthiness and your business's health.
The meaning of an unsecured Business Loan is straightforward: it lends a hand to businesses that might not have hefty assets for collateral or those in need of swift funding without long assessments. This feature makes unsecured loans a fitting choice for many business scenarios.
What are the types of unsecured Business Loans?
Term Business Loan:
A fixed amount is borrowed and repaid over a set term, usually with fixed interest rates. This type of loan is ideal for funding specific projects or expansion plans. It’s particularly suitable for businesses with predictable income, ensuring financial planning and budgeting stability. Moreover, the clarity of fixed repayments simplifies cash flow management, allowing businesses to plan long-term without the worry of fluctuating interest rates.
Overdraft (OD) Facility:
This facility allows businesses to overdraw their current account up to an agreed limit, providing flexibility to manage cash flow fluctuations. It acts as a financial buffer, ensuring that businesses can continue their operations smoothly even during periods of uneven cash inflow. Additionally, interest is only charged on the amount overdrawn, making it a cost-effective option for short-term funding needs.
Loan on Business Credit Card:
Business credit cards offer a revolving credit line with the added benefits of rewards and the flexibility of using the funds as needed. These cards are not just a source of funds but also a tool for efficient expense management, offering detailed reports that can help track and control business spending. The rewards and benefits, such as air miles, cashback, and discounts on business services, can further contribute to business savings.
Government-backed Financing Schemes:
These are loans partially guaranteed by the government, aimed at supporting small and medium-sized enterprises (SMEs) with less stringent requirements. By reducing the risk for lenders, these schemes encourage financing to more businesses, including startups and those with less established credit histories. Furthermore, these loans often come with guidance and support services, providing valuable business growth and development resources.
Eligibility criteria for unsecured Business Loans
When you're ready to apply for a Business Loan, make sure you have the following documents to hand:
- Know Your Customer (KYC) documents: These verify your identity and may include your passport, driver's license, or other government-issued ID.
- Completed application form: Ensure that the loan application form is thoroughly filled out and signed.
- Financial statements: Provide documents that reflect the financial health of your business, such as profit and loss statements and balance sheets.
- Bank statements: You'll need to submit statements from your business's bank account covering the last six months.
- Tax documentation: This includes your Permanent Account Number (PAN) card or Form 60, as applicable.
- Proof of Business: Documents such as business registration certificates, licenses, or other legal documents that verify the existence and legality of your business.
What are the benefits of unsecured Business Loans?
Unsecured Business Loans come with a suite of advantages that cater to the dynamic needs of businesses seeking prompt and flexible financing options. Here's how these benefits play out in practice:
- Faster processing time: The absence of collateral evaluation significantly speeds up the loan approval process, allowing businesses to receive funds more quickly, which is often crucial for taking advantage of time-sensitive opportunities.
- Affordable EMIs: With competitive interest rates, unsecured Business Loans can offer manageable Equated Monthly instalments (EMIs), making them a practical choice for businesses aiming to maintain healthy cash flow.
- Flexible repayment terms: These loans often provide a range of repayment options, allowing businesses to choose terms that align with their revenue patterns and financial planning and thus reduce the strain on their finances.
Also Read: Get the funds you need with an MSME Business Loan
Whether you're seeking a quick boost through Axis Bank's Unsecured Instant Business Loan, with up to ₹20 lakh available via a seamless 24x7 MSME digital lending program, or aiming for a more substantial uplift with up to ₹35 lakhs via the Unsecured Business Loan Basis Banking, the paths lead to hassle-free financial support and are tailored for both self-employed professionals and business owner. Unsecured Loans are designed to help you easily and confidently navigate your business’s journey to success.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
