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An unsecured business loan is offered to customers without having to pledge any form of collateral to the financial institution. This form of business loan is offered based on an applicant’s credit score, financial documents, age, income etc.
An unsecured business loan is appropriate for people who do not have any assets to put up as collateral. Furthermore, if your company has a high level of market credibility, you may be eligible for a higher loan. Unsecured small business loans are a boon to many business owners.
Term Loan: Any loan whether it is secured or unsecured that is availed for a specific time duration and needs to be repaid in form of EMIs within defined time frame.
Working Capital Loan: Working capital loan can be availed to meet the day-to-day expenses of business and is approved based on the creditworthiness and repayment capacity of the applicant.
Overdraft: Overdraft is a type of loan or credit limit assigned by the lender which can be availed in parts defined by the financial institution. The interest rate is charged only on the used or availed amount from the assigned or sanctioned credit limit.
Loans under Government schemes: There are several Government initiated loan schemes under which small business owners can avail business loans at comparatively lower rate of interest. These schemes include Mudra loan, Stand-up India, Start-up Scheme, Prime Minister Employment Generation Program (PMEGP), Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), SIDBI’s Loans in 59 minutes, etc.
Merchant Cash Advance: It is a type of cash advance that is based upon the credit card sales deposited in a merchant’s account. Loan amount is decided upon the credit card swipes or monthly volume of the business.
Micro Loans: Micro loans are generally offered by Micro Finance Institutions (MFIs) to meet the instance cash requirement of the borrower. The loan amount offered under Micro lending ranges between Rs. 5,000 – Rs. 2 lakh or more depending upon business requirements.
Business Credit Cards: Entrepreneurs can also take business loans against their business credit cards. The loan amount is basically credit line(s) sanctioned by the lender to meet the working capital requirements of a business.
Eligibility Criteria for Unsecured Business Loan
Age Criteria: Minimum age of 18 years at time of loan application and maximum 65 years at time of loan maturity
Credit Score: 750 or above
Business existence: Minimum 1 year with signs of profit; operating from the same location for last 1 year
Applicant should have a regular source of income with salary slips
Bank details or last 6 months’ bank statement