Businesses require proper funding at the right time to thrive. Getting loans from financial institutions requires assets or collateral as a guarantee. Informal lending sectors have eased the loan taking process where guarantees or collaterals are not needed. Loans are provided based on an individual’s creditworthiness determined in terms of financial papers, income and other associated factors. These forms of unsecured business loans have various benefits to help your business grow. Below mentioned are some of the features:
No need for collateral
Secured loans require the use of property as a form of collateral. Unsecured loans do not require security or collateral like mortgaging homes or other properties. A startup company does not have substantial assets to provide security while lending money. The lack of primary assets does not qualify small businesses for secured loans. An unsecured business loan is a correct option if you are a small or medium-sized business. As you do not put up any asset or collateral, the lender asks only for a personal guarantee before approving the loan. You also need not worry about losing personal assets if you encounter business problems or if it does not work out.
Easy process of loan application
The documentation process of getting unsecured loans is more straightforward and quicker. Since collateral is not required, the process of asset evaluation gets eliminated. The application for company loans might be a bit longer as the financial institutions assess the ability of the companies to pay their bills and debts timely. Non secured business loans allow the lender to consider other factors like operation time, monthly sales, credit rating before approving the loan. Therefore, the easy and short application process of unsecured business loans is preferred by establishments seeking urgent financial assistance.
Flexible fund usage
Unsecured business loans offer flexibility in multiple ways. You can utilise funds in whichever way you want without mentioning their intended use. You can use it to grow your business, conduct research and development, hire staff, or other reasons. Additionally, you can also choose the desired loan amount and time. It is best to bear in mind that each lender is different, and your diligence is required to keep this option open for your business.
Improve credit scores
An unsecured business loan will help you develop a credit score if you are a first-time borrower. You must pay, however, pay EMIs timely to avoid default. It will also be a decisive factor in helping you borrow funds to finance an important venture when you have a good credit history supporting the loan application.
Creditworthiness is the primary criterion to get unsecured loans, and hence lenders require documents like profit and loss statements, bank account statements and other credentials. If you are applying online, you need to provide some basic information to ensure the disbursement of the loan. The minimalist documentation procedure is of great advantage if you have an urgent requirement for money for your business.
Unsecured loans are designed in a way so that applicants quickly obtain them. A lender will likely consider your application even if you have been operating for only six months with a turnover of just 50,000 dollars. You will also receive an approval message within two hours of your application.