Unsecured Working Capital Business Loan from Rs. 10 Lacs to Rs. 3 Crores in india, at Attractive Interest Rates

What is Unsecured Business loan?

An unsecured business loan is a loan offered by banks and financial institutions based on the credit worthiness & repayment capacity of a borrower. No property collateral is taken as security for this loan .There are two basic criteria looked in to by a lender, while assessing unsecured business loan proposals

• Repaying capacity of a borrower :Repayment capacity of a borrower is assessed with the help of Income tax returns, financial audit reports, GST returns, Bank statements, existing loan obligations and loan repayment statements. Accordingly, there are various products available to derive eligibility for unsecured business loan like Net Profit, Gross profit, Average bank balance, Sales Turnover margin, repayment track history, GST returns etc.
• Intention of a borrower to repay : This is another important criteria in assessment of unsecured business loan proposals. Borrowers having very good repayment capacity, may reflect poor Intention for repayment of loans, depending upon loan availed in the past.This may be due to borrower not giving due priority for loan repayment. The intention is checked with the help of credit score of a borrower, which reflects month wise repayments done by borrower for all loans availed in the past. So, even if borrower meets all credit criteria but does not have good intention, loan can not be sanctioned.

Apart from these 2 main criteria, other criteria required for availing unsecured business loans are

- Business Stability of minimum 3 yrs required. However, some lenders have flexibility in it and provide loan for business which is 1 year old also.

- Age of borrower : Age of main promoter of business requires to be less than 70 at the end of loan tenure. This criteria can also be diluted by taking legal heir of the promoter as coaplicant.

Why Unsecured business Loans are highly popular in business community ?

• Easy application & Documentation : Application process & documents required for unsecured business loans are very less as compared to other secured loans. Both can be submitted online within few minutes.
• Speed of sanction : Unsecured business loans are sanctioned within 1 to 3 days, after all documents are submitted. It means, borrower can get money in hand, when its needed the most.
• Multiple Eligibility criteria : Business loan sanction does not depend upon only one criteria. Rather there are many different criteria for different lenders like Income criteria, Turnover Criteria, Repayment criteria, GST criteria etc. If you are eligible for any one or two criteria, your loan can be sanctioned.
• Collateral free loan : Being as unsecured loan, no property collateral is required. Hence, borrower an avail this loan very easily, only by submitting basic documents
• Flexible End use : Loan availed from unsecured business loan can be utilised for any purpose like working capital, business expansion, purchases, bridge loans, payment to suppliers etc.
• Quantum of loan : Unsecured business loans are available from Rs. 5 lacs to Rs. 2 crores, depending upon financial eligibility of a borrower. Higher the eligibility, higher will be the loan sanctioned.
• Fund rotations : Though interest rates are little higher for unsecured business loans as compared to secured loans, borrowers who can rotate funds in the business multiple times in a year, find the loan very lucrative.

Secured Business Loan or Unsecured Business Loan ?

There is always a dilemma in borrowers mind whether to opt for secured business loan or unsecured business loan. Following difference between secured and unsecured business loan will help in such situation :

• Collateral Requirement : Secured loan is backed by property collateral while unsecured business loan does not require any property collateral.
• Loan Amount : Secured loan is normally higher in amount, ranging from Rs. 50 lacs to 50 crores, while unsecured business loan is from Rs. 5 lacs to 2 crores.
• Repayment Tenure : Secured loans have longer tenure (7–15 years), while unsecured loans are short-term (1–3 years).
• Cost of Loan : Being unsecured, risk for lender is higher in case of unsecured loans. Hence, unsecured business loans are costlier than secured business loans.
• EMI Burden : With lower repayment tenure & higher interest rates, EMIs of unsecured business loans are always higher than secured business loan of same amount.
• Documentation : Documentation for unsecured business loan is much lesser than secured loan.
• Sanction Time : Unsecured loans are sanctioned faster. Secured loans usually require 15–20 days for sanction.
• Form of Loan : Secured loans are given in form of Term loan, Line of credit, or Overdraft. Unsecured loans are generally given as Term loans, though some institutions provide unsecured working capital loans too.