Things to check for when taking out an unsecured business loan


If you are considering starting a business, it can be difficult to finance it to grow and operate in a dynamic market. However, you can do this by taking out an unsecured business loan. Although these loans are readily available, there are certain factors that you need to keep in mind to get approved.

A business loan allows you to borrow money from financial institutions. However, you have to repay this amount within a certain period with interest. Also, you don’t have to provide collateral to the financial institution when you take out unsecured business loans.

Nitin Mathur, CEO of Tavaga Advisory Services, said: “An unsecured business loan or more commonly referred to as a business loan is a loan made without any collateral or collateral. Banks and non-bank financial corporations offer business loans such as working capital loans, start-up loans, bill finance, equipment finance, and overdraft to borrowers. “

Ajay Mishra, Head of Business Loans, Paisabazaar.com, said, “As with any loan, those who are considering obtaining business loans should opt for a lender who provides them with the desired loan amount at the interest rate on the loan. as low as possible for a comfortable loan period. corresponding to its repayment capacity. Since the processing of business loan applications can vary widely from lender to lender, those considering unsecured business loans should compare the TAT (turnaround time) of disbursement while weighing options for unsecured business loans. “

In addition, the loan seeker should also consider the nature of the business loan facility, such as a term loan or overdraft / cash credit facility. For example, overdraft / credit cash loans would be suitable for those who need loans to handle frequent cash flow lags.

Loan seekers should also remember that lenders may take into account the nature and age of the business, a loan seeker’s credit rating, business turnover, average bank balance. , bank turnover, bank statements, existing bonds, etc., when assessing applications for unsecured business loans. .

Many lenders may not lend money if your business’ cash flow is insufficient. Lenders usually evaluate the business model before sanctioning the loan amount. Therefore, you need to maximize cash flow through effective cash management.

On the other hand, the likelihood of getting loan approval increases if you present a business model with an attractive sales projection. Apart from that, you should always be prepared with a blueprint for your business model. It should contain details like how much the business needs to get started and how much will be invested in growing the business from time to time, the revenue model, etc.

While availing a loan, applicants should ideally compare unsecured business loan options offered by as many lenders as possible. You can do this by visiting online financial markets offering business loan options from a wide range of lenders.

Most lenders advance a loan amount up to ??50 lakh, but some also provide up to ??1 crore. The loan term varies from 1 to 5 years. Eligibility criteria for a business loan include borrower’s age, business, turnover, tax returns, bank statements for at least the past six months, a credit score of the owner of the company, etc. However, credit history plays a decisive role in instant approval of business loan. It defines your ability to repay a loan amount.

“Business loans can be used by homeowners, partnership companies, private companies, limited companies and individuals. Business loans are more suited to businesses that are just starting out and may not have physical assets to provide as collateral, ”Mathur said.

“A business loan can be used for any business expansion, equipment purchase, etc. The lowest interest rate on an unsecured business loan is 14%. The interest rate on a business loan depends on factors such as the age of the business, profitability, prospects for future growth, the credit rating of the business owned (in the case of a self-employed person, of an owner or of a partnership company) “, he added.

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