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Steps to Getting a Business Loan without Security

Investment and ROI – two invariably interlinked terms which determine the potential success and failure of a venture in the long run. Although a steady cash flow is imperative to ensure the constant running of a business, yet a sudden bearish market trend can cause an organization to encounter monetary inconsistencies.

However, taking a loan by mortgaging one’s company or house may not be the ideal solution. Failure of repayment can end in the applicant’s real estate getting confiscated by the lending institution.

So, the solution? SIMPLE! Opt for a loan without security. Wondering how?

Well, NBFCs such as Bajaj Finserv provide unsecured business loans to applicants in exchange for minimal documentation. Moreover, with competitive and attractive interest rates, rest assured to reinstate the working capital and ROI of your business.

However, ensuring the successful approval of your loan is crucial before placing an application. In this respect, have a look at the following check points:

Decide on the type of loan – 

Lending institutions often provide business loans segmented according to the needs of the borrower. For instance, a venture may require a loan for:

  • Buying machinery
  • Factoring outstanding invoices or simply,
  • Funding their working capital.

Furthermore, each loan type may come with a different permissible limit and rate of interest. Thus, planning your area of leveraging the funds can ease out your task in securing a collateral free business loan.

Maintaining the credit score – 

Being unsecured in nature, a minimum viable credit score presumes centre stage. Offered by CRISIL, one should have a minimum credit score of 750 or above to ensure the successful approval of your unsecured business loan.

  • In a nutshell, the credit score depends on the following factors:
  • Clean credit history (successful & time repayments)
  • Records of loan denials
  • Present outstanding dues
  • Loan defaults

In addition to the above, maxed out credit cards and the duration of your credit history are also factors to ponder on.

Establishing your repayment capabilities – 

To be precise, the repayment capability of a venture decides the sum of business loan without security a company is eligible for. In this respect, a company’s liquidity ratio aids a lending institution to judge a company’s quarterly or annual turnover.

Additionally, better a company’s monthly disposable income, higher will be the loan approval amount. A lending company will prefer close to 55-60% of a venture’s monthly disposable income to be kept for repayment purposes.

Compilation of required documents – 

While credit score proves to be a vital checkbox for financial lenders, providing mandatory documents is also crucial for making your venture risk worthy. In addition to income statement, balance sheet and cash flow statement for the past two years, business owners will also need to provide:

  • Personal or business credit card report
  • Bank statements
  • Registration license (center or state)
  • Tax return statements

So, having mentioned the trivial steps of availing a business loan without security, let’s take a glimpse of the features and benefits of these loans.

Unsecured business loan – How does it Suffice?

Availing a collateral free business loan from a reliable financial institution tags along the following benefits of financing:

  • Corporate renovation

Not only are you privileged to expand geographically, but also revamp the interiors of your existing space. A shift towards equipment modernization will, in time, escalate a venture’s ROI.

  • Inventory & equipment

Stocking up inventory or purchasing new equipment – leverage your loan amount to accelerate your production capabilities.

  • Contractual hires

Often certain projects may require additional employee strength to meet deadlines. Thus, reallocating and distributing projects to remote employees can aid in cracking that bulk order.

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