Micro, Small, and Medium Enterprises (MSMEs). Whether you need working capital or want to expand the business, purchase equipment, or regulate cash flow, an unsecured business loan pulls you out of the financial crunch without the distress of pledging equipment or other property as collateral.
Business loans without collateral have a higher risk profile for the vendor. Therefore, unsecured loans are only available for MSMEs with a high credit profile and at a comparatively higher interest rate.
You can expect competitive interest rates on unsecured business loans of up to 50 lakhs, which the lender has final discretion over, based on your credit score. You can get the loan as fast as within three working days for your business needs.
Types of Business Loans Without Collateral
The type of unsecured loan you need depends on the reason you are seeking the funding. Here is the list of unsecured loans for MSMEs:
| Unsecured loan type | Description |
| Term loan | Loans for a specific purpose (e.g., business expansion) that you must specify to the lender. They have a monthly loan repayment plan. |
| Overdraft | Loan or credit limit that you can avail in parts and pay interest on only the amount which you use. The financial institution decides the parts in which you may get the loan. |
| Working capital loan | Loans to run your business’s day-to-day operations. It is approved based on the creditworthiness and the repayment capacity of the business. |
| Merchant cash advance | If you have a high volume of credit card sales, you can get merchant cash advance that depends on the monthly credit card swipes. |
| Business credit cards | On a business credit card, you can get a loan or credit line against it for working capital requirements. |
| Micro loans | Smaller amounts of up to 2 lakhs for micro businesses to meet their instant cash requirements. |
Unsecured Business Loan Eligibility Criteria
You need to fulfil certain conditions to acquire an unsecured business loan. These criteria vary based on the bank or NBFC you choose to borrow from. However, here are a few factors that will increase your chances of getting a loan with any institution:
1. Turnover of 2 crore and above
2. Credit bureau score of more than 700
These are not mandatory for every small business. Speak to the loan advisor to understand the terms and amount you are eligible for.
Further, to get an unsecured business loan, you must provide the following documents:
1. Balance sheet and business income tax return – ITR (3 years)
2. Statement of all banks (12 months)
3. GST returns for the current financial year
4. KYC of the promoter/director (Aadhaar card or PAN card)
5. Proof of ownership of the residence or factory
6. Electricity bills (12 months)
7. Complete the loan application form with passport-size photos of the applicant(s)
Features of Unsecured Business Loans
Unsecured business loans are available for MSMEs with the following features:
1. Capital requirement: You can borrow up to 50 lakhs without the need to pledge collateral.
2. Flexible tenure: You can get it for a flexible tenure of 12 to 36 months and repay based on your cash flow and EMI payment capacity.
3. Eligibility for further offers: Become eligible for top-up loans, reduction of interest rates, etc.
Apply for an Unsecured Business Loan
Contact the financial institution and speak to a loan advisor to understand the options available and assess your needs. Here are the steps to apply for a loan:
Step 1: Fill out the online form with details such as loan amount, annual gross turnover, city of residence, number of years in the current business, and contact details.
Step 2: Read the terms and provide your consent by agreeing to them.
Step 3: Provide details such as the company name, nature of business, gross annual profit, types of industry, details of existing loans, KYC details, date of birth, bank details, etc.
Step 4: Once the financial institution completes the verification, the loan advisor will contact you to help you complete further steps.
Apply for an Unsecured Business Loan
Contact the financial institution and speak to a loan advisor to understand the options available and assess your needs. Here are the steps to apply for a loan:
Step 1: Fill out the online form with details such as loan amount, annual gross turnover, city of residence, number of years in the current business, and contact details.
Step 2: Read the terms and provide your consent by agreeing to them.
Step 3: Provide details such as the company name, nature of business, gross annual profit, types of industry, details of existing loans, KYC details, date of birth, bank details, etc.
Step 4: Once the financial institution completes the verification, the loan advisor will contact you to help you complete further steps.
FAQs
1. Who is eligible for an unsecured business loan?
All micro, small, and medium businesses are eligible to apply for a business loan. They can get it if they meet the eligibility criteria of credit score and repayment capacity.
2. How much loan can I get without a collateral for business?
There is no minimum amount for a business loan. However, the maximum amount one can borrow through an unsecured loan at Electronica Finance Ltd. is INR 50 lakhs.
3. What are the requirements for an unsecured loan?
The business owner must have a credit score of 700 and above and a turnover of INR 2 crore and above. However, these requirements are not mandatory. Speak to a loan advisor for the terms applicable to your business.
4. Are business loans without collateral easy to get?
Yes, unsecured business loans are meant to support your immediate cash requirement. If you meet the eligibility criteria, you can get a disbursement in 3 working days.
