Unsecured Business Loans

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Unsecured Business Loans

Unsecured business loans enable entrepreneurs to get instant funds up to Rs. 55 Lakhs in their account within 48 hours without any collateral. These loans can be repaid within a tenure of up to 8 years at affordable interest rates.

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Updated: 20-05-2024 03:32:48 PM

What is an Unsecured Business Loan?

An unsecured business loan is simply a business loan without collateral that allows borrowers to obtain quick capital without pledging any of their assets as collateral. Many banks and non-banking financial companies (NBFCs) offer these loans if the borrowers meet their set eligibility criteria.

Features & Benefits of an Unsecured Business Loan

Following are the key features and benefits of an unsecured loan for starting new business without security:

  • Loan amounts of Rs. 2 Lakhs to Rs. 55 Lakhs are available to manage any small or big business expense.
  • No collateral is required to obtain the loan.
  • Three variants to choose from viz. Term Loan, Flexi Term Loan, and Flexi Hybrid Loan.
  • Zero part-prepayment charges are levied on Flexi Term Loan and Flexi Hybrid Loan variants.
  • Convenient repayment tenure of 1 year to 8 years.
  • Get money transferred into your bank account within 48 hours of approval (depends on case to case).
  • No hidden fees and charges are involved.
  • Online application process.
  • The rate of interest starts from as low as 9.75% p.a.
  • A processing fee of up to 3.54% of the sanctioned loan amount has to be paid

Unsecured Business Loans Types

Following are the three main collateral-free business loan types:

  • Term Loan: This is a regular business loan where you borrow a specific amount of money divided into equated monthly installments (EMI), consisting of principal as well as interest components. If you choose to close your loan prematurely, a fee is charged on part-prepayment and full prepayment of the loan.
  • Flexi Hybrid Loan: This variant is exactly like a Flexi Term Loan. The only difference is that your EMI for the initial period of the loan will only consist of the applicable interest. For the remaining period, the EMI will consist of the principal and interest components.
  • Flexi Term Loan: Under this loan, you can withdraw an additional loan amount as a top-up on your previous loan and repay in flexible way by just logging into your account.

Let’s understand this with an example:

Suppose, you have taken a Flexi Term Loan of Rs. 30 Lakhs for a tenure of up to 5 years. You have timely paid the EMIs for the first 6 months. So, by now, you might have paid roughly Rs. 7 Lakhs. Now you need an additional Rs. 5 Lakhs for an unforeseen business expense. You can easily withdraw the additional amount by just signing into the customer portal of your Flexi Term Loan account. Now, that you have decided to pay off a portion of your loan (suppose Rs. 10 Lakhs), you can easily do so online by logging into your loan account. Your interest will be automatically adjusted and you only need to pay off the interest on the outstanding principal loan amount. Your EMI will include the principal as well as the adjusted interest amount.

Unsecured Business Loan Interest Rate

The interest rate for a loan for a business without security ranges from 9.75% to 25% per annum depending on various factors including the borrower’s credit score, income, age, loan amount requirement, and so on. Apart from the applicable interest on unsecured loans, these loans also attract a processing fee of up to 3.54% (including the applicable taxes) of the sanctioned loan amount.

How to Apply for an Unsecured Business Loan

Here’s how to apply for an unsecured business loan NBFC or a bank online:

  • Visit the official website of the lender and click on the ‘Apply Now’ button.
  • Enter your 10-digit mobile number to receive an OTP.
  • Fill in the online loan application form by providing your basic details such as your name, date of birth, PAN number, area PIN code, etc.
  • Click on ‘Proceed’ to visit the loan selection page.
  • Enter the required loan amount, and choose from 3 business loan variants (i.e. Term Loan, Flexi Term Loan, and Flexi Hybrid Loan).
  • Select the desired repayment tenure and click on ‘Proceed’.
  • Complete the KYC process and submit your business loan application.

Documents Needed for an Unsecured Business Loan

The following are the documents commonly required for an unsecured business loan in India:

  • KYC documents such as Passport/ Aadhaar Card/ Driving License/ Voter’s ID/ NREGA Job Card/ Letter from NPR
  • PAN Card
  • Business ownership proof
  • Other financial documents (as required by the lender).

Unsecured Business Loans Eligibility Criteria

The common unsecured business loan eligibility criteria are mentioned below:

  • The applicant must be of Indian nationality.
  • The business vintage must be at least 3 years.
  • CIBIL score of the borrower must be at least 680.
  • The applicant must be self-employed.
  • The age of the applicant should be between 24 to 70 years.

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Anyone can get an unsecured loan for a business without security if they meet the eligibility criteria set by the lender. All you need to do is find a suitable lender who provides unsecured business loans and apply for the loan.

Yes, many banks and NBFCs offer business loans without collateral to eligible applicants. These loans are called unsecured business loans.

Yes, some banks offer business loans without collateral (commonly known as unsecured business loans) to eligible applicants.

A small business loan can be secured as well as unsecured depending on the variant of the loan. If you get a loan without any collateral it will be unsecured and if it is offered against a collateral, it will be a secured small business loan.

You can avail of a maximum business loan of up to Rs. 55 Lakhs without any collateral, depending on your eligibility.

AU Small Finance Bank, Bajaj Finserv, Aditya Birla Finance Limited, Axis Bank and many other lenders give unsecured loans to eligible businesses.