Business owners dream of taking their business to new heights and reaching new markets. However, it is easier said than done. Expanding the business presence is not an easy job and requires funds. If there are inadequate funds in the business, there is no possibility of reaching the potential or meeting the expansion goals. Fortunately, there are many lenders in the country that offer a loan for business. There are two types of loans available to all businesses. One is a secured loan where the borrower is required to hypothecate an asset as a security for the funds. And the second one is an unsecured business loan where there is no need to hypothecate any asset. You will be able to get funds based on the profile and you can apply for a loan even if you have hypothecated the asset to a different lender. Here are the five things you need to know about unsecured loans.
- Quick approval – The biggest advantage of the loan is quick processing and approval. Since there is no need for hypothecation of an asset for the loan, there is no need to hire a market valuer or transfer the documents to the lender. This saves time and the process of approval is quicker. The loan application will move faster and you will be able to get access to funds within no time.
- High-interest rate- The rate of interest is an important factor in the loan. It can increase the overall cost of borrowing. Lenders have varying interest rates and you need to compare the same online. Because this is an unsecured loan and the risk lies on the lender, the rate of interest for the loan will be higher as compared to other loan products. You need to factor the interest element in the EMI and then make a decision.
- No collateral- As the name suggests, there is no security required in an unsecured business loan.You can get access to funds without hypothecation. The lender will consider your credit score and profile before approving the application. You do not need to worry about losing your asset in case of nonpayment of dues. You can apply for the loan even if you have not invested in any assets under your name or the name of the business.
- Suitable for all business needs- The loan has no restrictions on the end-use. This means you can use it for any purpose in the business and the lenders will not ask you about the same. You can use it for the purchase of an asset, or expand the business operations, or for marketing efforts. The loan is available for different purposes and you can choose where you want to allocate the funds.
- Repayment tenure- Consider the repayment tenure when you sign on the loan documents. The repayment tenure varies from 3 years to 7 years and you need to make the repayment within the due date. The tenure will also depend on the loan amount but you need to consider the monthly inflows and outflows before you agree on tenure and the EMI amount.
An unsecured business loan can help the business in many ways. If you plan well and allocate funds to the optimum, you will be able to take the business to new heights with this loan.