It is mandatory in terms of running a business that the requirement of working capital becomes an inevitable factor in its operation and progress. To avail the required funds, one has to go for either a secured loan or an unsecured loan from a financial institution.
So availing a three-year term loan based on a sound balance sheet of a public limited company, private limited company, partnership firm or a proprietary firm is what we call a secured business loan. On the other hand, funding of working capital for the above-mentioned type of businesses to enhance the same without any collateral is what we call an unsecured business loan. In this type of loan, the borrower does not need to pledge any of his asset or property.
From where can you avail the unsecured business loan?
So what to do if you are looking for a business loan without risking your asset or property? Such loans are provided by banks and financial institutions. In India, among the various banks are SBI, ICICI, HDFC, etc. while among the financial institutions are Cash Suvidha, India Bulls, Cholamandalam financial services, Karvy financial services, Tata Capital and many more.
Criteria for availing an unsecured business loan
It is worth mentioning that the criteria for availing loans differ from bank to bank or financial institutions. However, the below factors are considered most often by the lending institutions:
• Age factor: Individuals falling in the age group of 24 to 58 years are considered eligible for availing a loan by most of the financial institution.
• Latest three years’ business experience: Lending institutions will prefer those businesses that show stability in their growth for the last three years. They tend to calculate the median annual profit and sanction a loan amount of 60% to 80% of that value.
• Total business performance: If you have managed to sustain a healthy business for a period of more than five years, you are more likely to avail the desired loan amount based on the financials of your business.
Points to remember
• You need to have a logical estimate of the required working capital based on your financials.
• Since eligibility criterion, procedures and formalities vary from institution to institution, you should compare the deals from all of them to find out which one suit you better.
• Do bear in mind that the rates of interest are higher in case of unsecured business loans compared to secured business loans.
• The main and most important of all for being eligible for availing a business loan is that you must have a good CIBIL report at the time of applying for the loan.
Availing a US loan is no longer a tough job. If you meet all the eligibility criteria as specified by the lending institution, the approval rate will be high. Your loan gets processed within 4-5 days depending on the completeness of documents provided by you. You have to pay a minimum of six EMIs before you prepay and foreclosure charges may vary from bank to bank.