In current times, businesses need sufficient capital to modernise, expand and make necessary changes to foster growth. In this scenario, a secured business loan comes as a boon for entrepreneurs looking to upgrade their business’ functionality by integrating the latest technology in equipment or to simply inject working capital in daily operations.
Business loans sometimes are hypothecated against a piece of machinery or are available as a secured advance, requiring borrowers to pledge collateral to avail them. In such cases, borrowers stand to avail an amount against the equity of the collateral pledged.
When individuals are looking to grow a business, a collateral-free advance acts as a better alternative to a secured business loan. While secured credits are better for first-time borrowers, who do not have sufficient credit history to convince lenders of their business’ credibility, an unsecured business loan can aid established business owners in expanding their operations with adequate financial support.
Following are a few pertinent facts to learn about secured loans and how a collateral-free advance can be a better option in this regard –
- Faster procedure
If individuals need money urgently, a secured business loan can help avail funds instantly. The eligibility procedure is not strict in case of this loan, as the lender only evaluates the market worth of the collateral before sanctioning the loan.
Nonetheless, one may need to undergo lengthy documentation to avail this advance, which they can do away with in case of an unsecured loan.
- Flexible repayment tenor
The tenor of secured business loans can be lengthy, leading to higher interest outgo. Before availing a business loan, individuals can check their monthly repayment liability by knowing the EMI business loan calculator’s use.
- Lower interest rate
The secured business loan comes with a competitive interest rate. However, sometimes business loan interest rate is higher, and available against sizeable EMIs. In this regard, one can look for a collateral-free advance with low-interest rates.
- Loan amount
In secured loans, the amount depends on the value of the collateral pledged. Those looking for a higher amount can opt for an unsecured business loan where the amount depends on one’s credibility.
- Credit score
In a secured business loan, the credit score is not essentially measured. Top NBFCs provide required loan amount even with a low credit score as in the case, if borrowers fail to pay the EMIs, financial lenders can seize the collateral to get back the loan amount.
However, top NBFCs extend attractive benefits on unsecured loans, which are available to individuals with a credit score of 750 or higher. If individuals require substantial capital for business loans against affordable rates, some NBFCs offer a loan amount of up to Rs.45 lakh with a tenor of 84 months.
Eligibility for unsecured business loans
To enjoy a faster approval of a business loan, one needs to comply with the following business loan criteria:
- Individuals should be within 25-65 years of age.
- Have business income tax returns filed for at least 1 year.
- Maintain a CIBIL score of 750 or above.
Individuals need to fill an online application form with necessary documents to complete the process to apply for an unsecured business loan.
Along with these, the availability of pre-approved offers from financial institutions like Bajaj Finserv expedites the loan procedure and saves time. These pre-approved offers are available on business loans, personal loans, credit cards, and more. Prospective borrowers can check their pre-approved offer by entering their name and contact information.
Hence, if the borrower is an established business owner planning on its expansion, he/she can opt for collateral-free credits, in lieu of a secured business loan.