Whether you’re an entrepreneur looking to expand your empire or an aspiring entrepreneur looking to establish yourself in the marketplace with a new business idea. You may need to come up with a business loan. The money generated by this loan can be used in a variety of ways. It can serve as working capital to support the growth of your business. On the other hand, it can be used to purchase high quality machinery or equipment to improve the quality of products and services. For hiring new employees and for any other activity that can help take the business to greater heights.
Borrowers have the option to choose between unsecured and secured forms of financing. Unsecured business financing can prove to be extremely beneficial, especially for those who cannot offer assets in the form of collateral. Nowadays, there are several financing institutions on the markets that offer such unsecured business loans. However, there is a possibility of higher risk. They strictly consider your creditworthiness. To gain the trust of the lender and effortlessly get approved for this loan, you need to have an excellent credit score. You must have an excellent credit score and a spotless payment record, and your business must be running profitably. In addition, your chances of getting a low interest rate depend entirely on your credit score.
General eligibility requirements for an unsecured business loan.
The eligibility criteria for unsecured business loans may differ from one lender to another. Below are some general eligibility requirements that are required by each lending institution. And you need to make sure that you meet them.
- For most lenders, the applicant’s age should be between 24 and 60.
- The applicant’s credit score should be 650 or higher. And you should not have any mistakes in the past payment history.
- You must provide all the required documents such as bank statements, income tax returns. And other documents that can tell about the stability of your business.
- You can apply for approval only if your business has at least 2 years of experience. And shows signs of profitability.
- Lenders will closely review all your business and personal documents to conduct a background check. And only if you meet the criteria, your application will be approved. Once approved, the funds will be quickly transferred to your account.
Some ways an unsecured loan can be beneficial to your business
- No collateral required – As the name suggests, unsecured business financing does not require you to offer any assets in the form of collateral to raise the funds. In this way, such loans provide you with an excellent opportunity to meet your diverse business needs. At the same time, they help you improve your low credit score without fearing the loss of assets.
- You do not lose the rights to your business – When you turn to an investor for an influx of funds. Not only are you forced to share ownership, but you also lose the right to make decisions related to day-to-day business matters on your own. This is not the case with an unsecured loan. The lender does not interfere in the running of your business and all rights remain entirely with you. You only have to repay the loan after a certain period of time set by the lender.
- You get competitive interest rates – The lending markets are flooded with lenders offering borrower-friendly interest rates to make it easier for borrowers to repay the entire loan amount. That’s because the interest rate makes a big difference in the amount of the monthly repayment payment. In addition, lenders even offer a flexible repayment structure, so you have the freedom to choose the term. And the amount of the repayment installment that can be adjusted to your financial situation.
- You experience a fast approval and disbursement process – Since in unsecured loans there is no involvement of assets or collateral. Lenders take a lot of time to approve your application. Moreover, these few formalities result in quick disbursement of funds to your account.
- You enjoy flexibility in using the funds – One of the most important benefits of an unsecured business loan is that you can use the funds for any purpose related to your business. From increasing inventory to purchasing machinery or expanding business operations. The lender places no restrictions on the use of the funds and allows you to use the money for any business need.
- You can count on a straightforward and hassle-free application process – to provide maximum convenience to consumers. Many of the lenders have now made the entire application process online. With this incredible facility, you can apply for the loan. Even if you are traveling or staying in a completely different city, you no longer have to visit the lender in person. This is especially beneficial in this day and age. The government has restricted the free movement of people in many areas.
- Early loan repayment without prepayment penalty – If you have been able to increase your profits and currently have sufficient funds. Then you can also repay the unsecured business financing early without paying additional fees. In other words, there are many lenders that will not charge you any fees for foreclosing the loan. By making a prepayment or partial payment, you can quickly rid yourself of credit eligibility and the stress that comes with it.
How do you apply for an unsecured business loan?
- Since there are various lenders in the markets. It is better to do thorough research on each of them to choose the most reliable lender. Besides doing a background check, you need to find out what exactly are the interest rates, terms, loan amounts. And the processing fees that each one of them charges.
- The next step is to check the eligibility criteria. Each lender requires different eligibility requirements. Therefore, you need to check the criteria of several lenders to decide on one lender. This one has the most flexible terms for approval.
- Before you apply for the loan, you need to equip yourself with all the required documents. So that you do not have any problems later. This includes bank statements, latest audited reports, self-certified KYC documents and the latest list of shareholders and partners.
- The final step is to carefully complete the application form to reduce the likelihood of rejection. Before submitting the form and signing the contract, you should briefly review the attached documents and especially read all the terms and conditions. Once approved, the loan amount will be transferred to your account within a day or two.
It is obvious that unsecured business financing can help entrepreneurs quickly raise the funds they need without having to pledge any asset. Such loans are offered solely on the basis of the borrower’s credit score, and the approval process does not take much time, making it easier for borrowers to fund their revolutionary business ideas. To apply for the loan effortlessly, you can follow the simple steps mentioned above. However, before applying, make sure that you meet the eligibility criteria.