A loan for business without security is the ideal loan product for small businesses who do not have an asset to hypothecate. It is offered without security and there is no need for the borrower to hypothecate his asset. In this blog, we shall discuss the loan for business without security in depth and learn how to apply for it.
What is Loan for Business without Security?
Running a business is not just a matter of producing goods and services. There is more to it! A businessman continuously looks forward to growth opportunities. And tries to leverage every growth opportunity it sees in order to grow upwards. However, there are times when a paucity or lack of funds comes in the way of leveraging the growth opportunity.
And when a business is in need of funds, it finds a business loan the best option available at disposal. Be it to regulate the cash flow or to increase inventory or sales, funds are required. Funds are the base upon which business works and grows. However, availing a business loan is not that easy as well.
In order to ensure that the lent money is secure, most banks offer loan for business with security. To avail this type of business loan, the borrower or businessman is required to hypothecate an asset. The hypothecated asset backs the loan amount and in case of default by the borrower, the lender can monetize the asset to recover loses.
Having said that, there are small business owners who do not have an asset to hypothecate. Or they simply do not want to take the risk of hypothecating their asset. And so, they face rejection while availing a loan for business with security. For their relief, there are many Fintech companies in the market that offer a loan for business without security.
A loan for business without security is also called the unsecured business loan. This collateral-free business loan is offered entirely on the basis of the credibility and creditworthiness of the borrower. The CIBIL score, bank details, business turnover, etc. are taken into account by the lender while approving a loan for business without security.
Step by Step Guide to Avail a Loan for Business without Security
Availing collateral-free loans for traders, self-employed, retailers, etc. is not that difficult in today’s world of technology. A business loan, working capital loan, flexi loan, or machinery loan without security can be easily availed online. Simply follow the below mentioned guide to apply for a business loan.
Step 1: Look for the Right Lender
The first step to apply for a business loan is to look for the right lender. Now that you are availing a loan without security, the right for you will be the one who offers collateral free loans. Since the risk factor is high in unsecured business loans, not many banks offer this type of loan.
So, the right lender here turns out to be NBFCs and online lenders. Now the best NBFC or online lender would be the one who offers unsecured business loans at basic eligibility criteria, minimal documentation, and lowest interest rates and has a smooth processing and disbursing process. The key point here is to shortlist a couple of lenders and not just one.
Step 2: Check the Eligibility Criteria
The next step is to check the laid business loan eligibility criteria by the shortlisted lenders. You can check the eligibility criteria of all the selected lenders and choose the one whose criteria you meet. The following is a generic list of eligibility criteria for a business loan, machinery loan, or other type of loan:
You are suggested to not to apply to all the selected lenders and instead just the one whose eligibility criteria you meet. And in case you meet eligibility criteria of more than one lender, you should apply for a loan for business without security with one lender only who offers loans at lowest interest rates. Applying for loans with more than one lender and later getting rejected impacts negatively on the CIBIL score.
Step 3: Applying for a Business Loan Online
After choosing the lender and meeting the eligibility criteria, the next step is to apply for the loan for business without security. Most of the NBFCs offer online loan application form. So, you are not required to visit the lender in person but can simply apply for it online.
You can visit the website of the lender and fill their online loan application form. Just duly fill all the required information and submit. In addition to the website, you can also download the mobile App of the lender – there are many lenders who offer their mobile App for the convenience of the borrowers.
Step 4: Submit Business Loan Documents
After applying for a business loan, you will next have to submit the required documents. You can simply upload the PDFs of the required documents online on the lender's website or mobile App. The following is a generic list of the business loan documents:
Step 5: Loan Approval and Disbursal
After you apply for a loan for business without security and submit all the required documents, a representative from the lender’s office will process your application and documents. The lenders also go for on-ground research and their representative might visit your office or house. If they seek you as an eligible candidate for a loan for business, they will approve your application and disburse the business loan in days specified by them.
However, if your application is rejected, they will message or email you the same with the reason for rejection and when you can next apply for loan.
There are many NBFCs and online lending companies in India who offer loan for business without collateral to MSMEs in India at minimal documentation, basic eligibility criteria, and lowest interest rates. And now that you know step by step guide to applying for a collateral free loan in India, you can take its benefits to grow your small business.