How to avail collateral-free loans in India?

Loans

Getting a business loan is not very difficult these days because of the significant simplification in the procedures involved and the reforms that are done in several tangents. An unsecured business loan is a financial support granted by a bank or a financial institution without the need for attaching any collaterals or property as a security by the applicant.

Generally, it is observed that a person with a higher credit score is more eligible for such financial support. Financial institutions ask for certain mandatory information and documentation. There are few lenders who may ask for additional information and details but all these are a part of formalities.

In India, the government has formulated and implemented several laws and policies that enhance the outreach of the facilities that have the potential to uplift the SME sector and also the economy as a whole.

There is a great misconception in relation to the best practices that may be followed by the businesses to increase their chances of getting the loan. There is a set of eligibility criteria that defines the overall chances of having the business loans that include but are not limited to the following:

  1. The business should be a private limited company and it is mandatory for them to have an MSME registration.
  2. Having proof of the share allotment is also mandatory.
  3. Term Loan or the working capital is funded under this scheme.

There are several features of the unsecured loans that make it favorable to the businesses and few of such prime benefits are as follows:

  1. Most of the lenders provide the facility of Online Business Loans. This makes it easier for an applicant to apply online anywhere and anytime as per his/her convenience. Even the application is processed faster.
  2. There is complete transparency as one is aware of the final status of his/her application
  3. Funds are directly credited to the applicant’s bank account.
  4. The loan repayment structure is easy and convenient.
  5. The tenure to repay the loan amount in unsecured business loans is shorter than traditional business loans. This makes it easier for a business owner to repay the loan amount faster and manage the long term finances of the company.
  6. No collateral or security is required. It may not always be possible for an SME owner to arrange for an asset that can serve as a security against the loan amount. An unsecured business loan doesn’t require the SME owner to submit any form of collateral. Such loans are provided immediately without any hindrance.

It is not a very convoluted task to get an unsecured business loan for your organization but there are certain factors that should be considered for the smooth processing of the loan application.

It is imperative that before approaching a bank or any financial institution, you prepare the entire business model for your business where the revenue model should be excessively emphasized as it will significantly boost your chances of getting the loan amount approved.

It is also important that you have certain documents ready while applying for an unsecured business loan:

  1. Business Plan
  2. Balance Sheet
  3. Project Report

The project report is also of significant importance as it defines the overall chances of the granting of the loan. Here are certain details that the project report should essentially have in it:

  1. Manufacturing process and relevant details which elaborates the capacity of production
  2. The requirement of essentials including the infrastructure
  3. The requirement of the raw materials
  4. Costing of the project and estimated budget
  5. Financial analysis

Hence in order to attain a fast business loan without submitting collateral as security, you need to be eligible, have all important documents along with a business plan ready.