Top 9 benefits of unsecured business loans for SMEs
Unsecured business loans are undoubtedly one of the best forms of financing available to small and medium scale enterprises. This is mainly due to not having to attach any form of collateral and relatively fast processing time. Apart from these two benefits, there are plenty more advantages to these collateral-free business loans. These loans could boost these small businesses and uplift their operations. These loans are granted based on the potential of the business, by evaluating their credit score and other such factors.
Small businesses need not have to limit their growth and development due to financial constraints anymore. If used well, with effective planning these loans could help achieve exceptional results.
9 reasons why unsecured business loans are beneficial to SMEs
- No collaterals required: The biggest advantage of having an unsecured business loan is that there is absolutely no need to provide any collateral as a guarantee against the loan amount to be repaid. Unlike other loans, this form of financial aid is dependent on the business and the credit score of the individual. It is not based on the estimated value of the attached tangible property.
- Easy Process: The application process is simple and does not require excessive involvement of an individual. It can be applied online in a few simple steps and the borrower will be guided throughout the process.
- Minimal Documentation: Documentation required to apply for such loans is minimal compared to traditional business loans. Most institutions just need you to provide a basic list of documents such as GST certificates, financial statements, ITR statements, etc. to have a clear understanding of your business’ financial standing and history. Most times, they may only ask you to provide them with the soft copy of these documents, which can save the stress in physical submission and misplacements of documents.
- Faster Processing Period: The processing time taken to sanction such loans, under the right circumstances to the eligible candidates is much faster as compared to traditional business loans. This might also be due to the reduced documentation. These loans can be availed within 5 days if all the conditions are properly met.
- Flexible Repayment Options: The banks and other financial institutions understand the problems a small business owner may face while repaying loans. To make it more suitable to them, these institutions readily offer flexible options to repay the amount taken as loan.
- Numerous financial institutions providing loans: There is a growing amount of financial institutions and banks that provide unsecured business loans. Some terms and conditions or eligibility criteria may differ from each institution. The SME owner can compare the various options available and choose to apply where it suits his business the best.
- Unrestricted Financing: There’s no restriction on the way in which the money may be used and this decision solely depends on the comprehension of the borrower. Banks or lending parties do not interfere in business These businesses could use this liberty to invest in the department they feel is most important to profit from additional funding.
- Shorter Deadlines: The tenure for unsecured loans is shorter. This is beneficial to SMEs as this avoids any long term liability. They can plan a budget around this deadline and repay the loan amount. By repaying the loan amount in such a short time, it makes it very flexible for SMEs giving them easier access to capital.
- Can induce growth and expansion of business: The funds received through these loans can help small businesses grow and expand without having to worry about financial limitations. If used well, these funds could boost the turnover of the business.
SMEs in India is growing exponentially. Sometimes, to reach an expected goal the business may require financial backing. Most major banks provide a large sum of amounts only against collateral; however, there are Fintech companies which understand the financial requirement of small and medium enterprises. Hence, these companies provide a loan amount that can be customized as per a SMEs requirement and that too without any collateral.
SME loan is easy to avail, where forms can be filled by visiting the company’s official website with necessary details, uploading required documents, attaching photographs. Once the application has been submitted by the borrower and approved by the lender, the loans are processed and disbursed quickly. These loans have short tenure i.e. of five years and lower interest rates that usually ranging from 13.50 % onwards making repayments easier.