What is Unsecured Business Loan - Its Types and Benefits

"Know what are unsecured business loans? Learn in detail about the various types and benefits of unsecured business loans. Apply hassle-free with My Mudra."

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4 mins read

Published: 12 December 2023

Updated: 12 December 2023

An unsecured business loan is a financial aid that is provided by the Banks and the NBFCs to the eligible business owners. There are times when a business demands expansion, more equipment, human resources, or any such thing that needs huge finance. The wiser decision for a business owner when financial stress comes in the way is to opt for the best financial aid. Instead of using savings, it is prudent to opt for an unsecured loan for business.

An unsecured business loan as the name suggests is a type of loan that is given by the lender without pledging any asset. In simpler words, a person can avail of an unsecured business loan online or offline without any collateral. A business loan does not need security to get an unsecured business loan. These loans are given based on the creditworthiness of a borrower. If a borrower has a stable income, employment, and a credit score of more than 700, then one can avail of an unsecured business loan in India. This article deals with the types of unsecured business loans in India and the benefits of unsecured business loans.

Unsecured Business Loan

Know unsecured business loans meaning before availing of a loan for your business. An unsecured business loan is a loan that can be availed by business owners based on credit score and stable employment. A business that has been running for 3 years is eligible for an unsecured business loan. Apart from this, the borrower's age must be between 21 years to 60 years old to get an unsecured Business loan in India. Maintain a credit score above 700 for availing of the unsecured business loan. With the advancement of technology, it has become extremely easy to apply for an unsecured business loan in India. The borrower can directly apply for the unsecured business loan online and complete the documentation online. Lastly, if your business has a consistent profitability and growth record of the business lenders will approve unsecured business.

Types of Unsecured Business Loans

Different types of unsecured business loans are available in India. A person can avail of the unsecured loan for business as per their terms and conditions.

  • Term Business Loan: This type of unsecured business loan comes with a repayment period of up to 4 years. In simpler words, A term loan is a short to long-term loan given by the bank to businesses. A borrower can utilize this amount to meet working capital requirements, asset purchase, expansion, etc. The period and interest of a term loan depend on the type of loan product selected by the business owner. Term loans are also known as installment loans. These loans are credit facilities in which the bank makes full payment to the Business. The repayment of a term loan is in the form of monthly quarterly half yearly or annual statements depending on the kind of agreement
  • Business Overdraft: Opting for the OverDraft facility allows you to borrow sums of money from your lender if you hold a business account such as a Current Account. The borrower shall be paying interest only on the used amount. The interest rate for the Business Overdraft facility starts from 9.65% P.A. You can get the Business Overdraft facility approved online and get the amount disbursed in your bank account in 24 hours.
  • Loan on the Business Credit Card: If you hold a Business Credit Card, you can become eligible for pre-approved loans on credit cards. Under this facility, the lender pre-approves you for a loan based on your credit card transactions and bill payments. If eligible, you can get the loan amount credited to your bank account within a few minutes to a few hours.
  • Government-Backed Schemes: Many government-backed schemes provide financial aid to people who need finance for growth in the Business. MSME Loan Scheme, Pradhan Mantri MUDRA Yojana (PMMY), National Small Industries Corporation, Credit-Linked Capital Subsidy Scheme, and SIDBI Loan. Through these loans, you can get the unsecured Business Loans at lower interest rates.

Benefits of Unsecured Business Loans

On availing of unsecured loans for Busines certain benefits come with it. Mentioned below are the top benefits that you can avail from Unsecured Business Loans Online.

  • No Collateral Required: You can get an unsecured business loan without having to pledge any collateral to the bank. An unsecured Business Loan means that the loan can be approved without any security to the bank. The feature of no collateral makes it easier to provide financial aid for business owners.
  • Faster Approval: Another advantage of availing of the Unsecured Loan for Business is its faster approval. With the advancement of technology, the approval of unsecured business loans can be given online. After the borrower completes the documentation, the bank assesses the profile and then sends the business loan approval online. Once the borrower approves the loan amount, the lender transfers the loan amount to the bank account of the borrower.
  • Build Credit History: Unsecured Business Loan builds your credit history. These loans are approved only if you have a credit score above 700. Also, if the borrower repays the loan amount on time, it will boost your credit score. A CIBIL Score above 700 has more chances of getting a loan.
  • Flexi Borrowing and Repayment: Many lenders offer flexible repayment and borrowing features on Unsecured Loan for Business. You can avail of the unsecured business loan in India and repay the loan amount in flexible EMIs.
  • Interest Rates: The interest rate of the unsecured Business Loan is 13% P.A* + extra charges associated with it. You can apply for the Unsecured Business Loan and get the loan approved at the least interest rate.
  • Documentation: The borrower can get an instant unsecured business loan online or offline with the least documentation. The borrower needs to provide income proof, identification proof, business proof, and address proof to avail of the loan.

Conclusion

Eligible Borrowers can avail of the Unsecured Business Loan easily when they know the types and benefits associated with it. Get an unsecured business loan online and get faster approval of the loan from the best lender. Also, complete the documentation online and disburse the loan amount in your account. Grow your Business without facing financial difficulties in life.

Also read: What are the Advantages of Unsecured Business Loans?

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