Unsecured Business Loans - A Complete Guide
As a business owner, you often face the requirement of funds. There could be a planned expansion or an emergency but the need for funds will have to be met. It is not feasible to always borrow from your friends and family time and again. This is why banks and financial institutions offer unsecured business loans that fit your diverse business requirements. There are basically two types of loans- secured and unsecured. In a secured loan, you have to provide a collateral for the loan whereas, in an unsecured loan, there is no requirement of collateral. If you are looking for funds that do not need a collateral, you can apply for an unsecured business loan.
All types of businesses are eligible for the loan and it has a quick approval process. If you want to apply for the loan, you need to first identify the purpose of borrowing. This will help you estimate the amount of money you need. Once you know where you will use the funds, you can apply for the specific amount of funds. In order to make a loan application, you need to submit the application form and provide the necessary documents. The documentation includes identity proof, income proof, proof of address, memorandum of association, KYC of all the partners, balance sheet and income statement and a projected balance sheet and projected income statement. These documents will help the lender estimate your ability to make the loan repayment in time. If you have a good credit score then the loan application will be approved at the earliest. However, you need to understand that the interest rates on an unsecured business loan are higher than those on a secured business loan. This is due to the risk associated with the same.
The loan amount can be used for any business purpose and the tenure will be based on the profile of the applicant and the loan amount. You can use the EMI calculator to estimate the amount of EMI payable by you. Once you provide the loan amount and tenure, you will be able to see the EMI amount. You can make changes to the input in order to get the desired output. The EMI will be your regular monthly outflow and if you default in the same, your credit score will be affected. The EMI calculator is available online and is easy to use.
When it comes to an unsecured business loan, it is important to scout the market and choose a reliable lender. You need to understand the terms and conditions of the loan and compare the interest rates before you make the final decision. The interest rate will make a significant difference to your monthly outflow. You need to consider the cash flow when you estimate the amount of EMI you have to pay. The business loan will help you serve the purpose of expanding your business and will help you take it to its potential. It is a preferred form of borrowing for many business owners in the industry. The loan can be used for working capital, for the expansion of your business or for the purchase of machinery. The loan amount is high and the approval takes about 8 to 10 working days depending on the profile of the applicant.
Whether you are a small business owner or have a large corporation, this loan will help you achieve your goals and take the business to new heights. If you plan the repayment schedule well, you will be able to make the most of the loan and build a strong credit history.
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