What is an unsecured business loan?
Unsecured business loans are a great funding option if you don’t own many assets or have no collateral to offer the lender as security, or if your business is growing fast and you need finance quickly. Unsecured business loans can be used to finance growth, invest in infrastructure, operations, or purchase new plant or machinery.
Unsecured business loans are generally short-term in nature, and their repayment period does not extend beyond 3 years.
What are the types of unsecured business loans available to me?
1. Overdraft/Credit Line:
An overdraft facility is a revolving line of credit, where the lender will give you a limit for an approved amount in your bank account. You can borrow money up to the sanctioned limit based on your needs. In such loans, interest is charged only on the amount utilized. An overdraft facility or credit line can help you solve short-term cash flow issues and meet other operational funding needs. Remember, if you need a higher value overdraft or line of credit, lenders may require some security/collateral from you.
2. Term Loans
A term loan is the type of loan you get from a lender for a fixed loan amount and tenure and a pre-determined repayment schedule and interest rate. The loan repayment period is generally up to 36 months. This gives you the option to take out a loan for working capital needs or other immediate funding requirements.
What are the benefits of unsecured business loans?
- They are your best business financing option if you don’t own any (or many) assets and do not have any collateral or security to offer to the lender.
- Lenders usually require less documentation for unsecured business loans compared to any other type of loan.
- They are quicker to get sanctioned and disbursed compared to other types of loans.
- The process to get an unsecured business loan is relatively simpler.
What is the difference between an unsecured business loan and a secured business loan?
Lenders will offer you different collateral terms, interest rates, amounts, and loan tenures based on whether you need an unsecured or secured business loan.
1. Collateral– To get a secured business loan from a lender, you will need to provide the lender with some form of collateral or security. This is usually not required for an unsecured business loan.
2. Interest Rate– Unsecured business loans usually have higher interest rates compared to secured business loans.
3. Loan Amount– A lender will offer you a larger ticket size loan when you apply for a secured business loan. This is because you are offering them some form of security in return to ensure they will be able to recover their investment amount if you default on your loan repayment.
4. Tenure – Since you are giving the lender some collateral or security, they will likely offer you a secured business loan for a longer loan tenure. Usually, the longest loan tenure of an unsecured business loan is about 36 months.
When you apply for a business loan with CreditEnable, we facilitate loans based on bank statement analysis, GST returns and other factors in addition to traditional assessment methods.
CreditEnable’s unsecured business loans are customized to the financing needs of Indian SMEs. This type of loan can fulfil your funding needs until your business can generate enough revenue to meet them.
And using our proprietary platform, we match your loan requirement with the right lender for your business in no time, speeding up the process when you apply for a business loan online.
Zero Hassle. Zero Fees.
Business Loans. Enabled Simply.