Simple steps to achieve collateral-free loans for your business

Posted by Saloni Nair on February 28th, 2019

Loans work pretty much like medicines to sick people. It helps heal companies that are financially struggling and instills support to help regain overall control. However, getting a loan is not always a piece of cake unless the company is already well established, holds an impressive market share, and is big on revenue digits. One of the most important prerequisites when it comes to loans is collateral. Collateral can be simply identified as a token of security to be left with the lender to instill a sense of faith between the lender and the borrower. If the borrower fails to pay off the loan, the borrower would then have the legal right to sell off the collateral to recover the amount lent. Collateral can be in the form of properties, assets, automobile, inventory or even expensive articles in some cases.

Young businesses with limited resources, however, may not frown as more and more funding agencies and companies have now introduced collateral-free loans for organizations that are in need of urgent finance and business funding but are unable to offer anything in security. Such loans are often termed unsecured loans.

What are some of the other advantages of such unsecured loans?

1. Unsecured loans offer fast disbursal: Traditional loans might take up to weeks or even months to be processed and disbursed. On the other hand, obtaining a collateral free loan or unsecured business loan might be a matter of one or two working days. This is why such loans are very beneficial in times of financial urgency.

2. Minimum paperwork required: One of the reasons why unsecured loans are processed so quickly is because of the absence of collateral verification and other documents. Paperwork is kept to the bare minimum when applying for a collateral free loan.

3. Helps build your CIBIL score: If you happen to own a company that is relatively fresh, chances are that your credit score might be at a negligible level. This would make it hard for your company to gain a loan through the traditional route. Such unsecured loans are expected to be paid back within shorter durations and have a maximum amount limit. This helps you manage your funds better and pay back the loan on time to build a good credit score.

Now that you know how beneficial such collateral free loans can be for you, take a look at the simple steps to achieving a collateral free loan –

1. Finding the right lender: Different lenders offer different interest rates on the same type of loan that you are interested in. You may approach a local funding agency physically or apply for one online.

2. Submit your documents: Attach/ upload all your personal and business related documents such as PAN card, Address proof, Business Registration proof etc. Providing Aadhar card will definitely help speed up the whole process.

3. Wait for Eligibility test: The lender might take a while to determine your loan eligibility after receiving your documents

4. Receive your loan: Loan amount will be credited after the eligibility process. One may also try the online business loan as these services are now omnipresent.