What Should You Expect While Applying for an Unsecured Business Loan?
Unsecured business loans are the perfect financing options for the business owners in India. These unsecured loans do not need any collaterals and as this fact is quite enticing for a few, the word ‘unsecured’ often raises a red flag for a few. So, if you are in dire need of some extra funds for smooth functioning of your business and if you have been contemplating on applying for this loan option to get going with your business, here are a few things to consider. In the end of this article, you will be able to decide well whether this unsecured loan option is good or bad for your business forefront.
What exactly is an Unsecured Business Loan (UBL)?
When a business loan is termed as ‘unsecured’, it means that it is not leveraged by any collateral or any assets. This is probably the only difference between a secured and an unsecured loan. So, when you apply for an unsecured loan, you do not need to worry about any collateral or any guarantor to sign on the application form.
What Backs the Unsecured Loans?
If you fail to pay back the secured loan amount, you lender will be given your leveraged assets. This guaranteed the repayments for all the lenders as they will even receive an ownership of your property if you fail to pay off the amount on time.
However, of an unsecured loan, as it will not be backed by any collateral, it will fully rely on your creditworthiness. Your credit score will play a major role in qualifying for this kind of loans for your business.
Which one is easier to get? A secured or an unsecured loan?
Unsecured loans are usually considered risky by the banks and the other money lenders as there is no asset involved. Without any guaranteed repayment, approval qualification for these kind of loans are usually harder to meet than any other secured loan options.
Oftentimes, the lenders offer a high rate of interest as well as approval sum for an unsecured business loan. So, if you can choose a reputed loan lender who offers unsecured business loans, then your loan application process can get smoother and better.
How to choose a lender?
Choosing a lender isn’t so easy these days with too many options all around. They will be the one responsible for setting your credit requirements and will also determine whether or not your application is eligible to the loan that you are wishing to get. So, before getting in touch with any one of them, make sure that you do your due diligence. You will have to very carefully consider all the pros and cons that the lender will offer along with the loan. Here are a few questions to ask before you go ahead with the application process-
- Is their customer service good enough?
- Do they have any past credentials?
- How much money can you actually borrow from them?
- Do you need any down payment to offer them?
- What is their loan disbursement process and how long does it take usually?
Along with these, you will also notice that a few of the lenders are usually more rigorous than the rest in terms of their credit history needs. A lot of small business go through struggles and it has gone higher due to the pandemic. So, it’s is important to find a lender who is a bit sympathetic to the plight of your business. They will usually look at your financial performance rather checking your credit history every now and then, which will give them an accurate view of your business’ eligibility to apply for the loan.
So, if you can keep these above-mentioned things in mind while applying for an unsecured loan for your business, the process can get easier. Also, these unsecured business loans are available in abundance. However, you need to do a thorough research before getting in touch with a lender. This will save you and your business from getting duped by a quack lender. All the best!