Are Unsecured Loans The Safest Choice For A Growing Business?

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Unsecured loans can be the best option when a business owner thinks of raising short-term finance. One of its important selling points is the safety offered by the unsecured loans, i.e. no collateral requirement.

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Are Unsecured Loans The Safest Choice For A Growing Business?

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Unsecured loans can be the best option when a business owner thinks of raising short-term finance. One of its important selling points is the safety offered by the unsecured loans, i.e. no collateral requirement. The business owner is not required to pledge an asset when applying for unsecured loans. The elimination of the security for the loans makes this type of loan product more accessible by the small business owners. The advent of NBFCs has made the credit facility accessible by all SMEs. NBFCs or new-age lenders use the internet to make the loan application approval and disbursal process faster. For example, if a business owner applies for a business loan with ZipLoan , he gets the funds within 3 days. Now, let’s take a look at how a business loan without security helps in business growth.

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No Collateral Required Small businesses lack collateral or security. They generally do not have valuable assets (business and personal) to offer as security to the lender. This stops them from availing business loans from the lender. However, as said earlier, there is no need for collateral to avail unsecured loans. Offering security is not the eligibility for loans. Instead, business plans, market opportunities, etc. are reviewed by the lender. Operational Success A business loan would help in purchasing raw materials and other items that are required for operations. Furthermore, business funding can also be used to pay wages or salaries, and clear immediate expenses and bills. A loan for business is helpful in efficient working capital management and meeting unexpected operational costs. Loan Ticket Size The loan amount is not tied to the value of the collateral hypothecated. Thus, the loan ticket size is dynamic and can be customized. The borrower can avail a loan of amount starting from Rs . 1 lakh to Rs . 5 lakh for NBFCs.

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Repayment Tenure The other plus of availing business loans without collateral is the flexible repayment tenure. This means the borrower not only gets the funds quickly but he can also repay them faster. The general loan repayment tenure options offered by most lenders is 12 months, 18 months, and 24 months. Serve Different Business Purposes Unsecured loans are generally offered for a shorter time duration. The loan amount can be used for a number of business activities, such as marketing activities, boosting working capital, and business investment. The business owner can use funds as per his discretion but only for business purpose.

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