A warm welcome to all entrepreneurs! Setting up a small business is the first step to make your entrepreneur dream come true. Yes, now you have made up your mind and you have a vision too. Will that alone suffices to start a business? Certainly no, you need a space, manpower, inventory, and working capital to begin and establish your business. For all the above-mentioned need money is the solution.
You might have money but not all the time. In case you have established a business, then you can use the money generated from profit. But having money may not be the scenario always. Then you may opt to take a Loan to Start a Business.
What is a business loan?
Every business from inception requires money to grow and the money borrowed from a bank or lending institution is called a business loan. These loans are given at a stipulated time for a certain interest rate. The lender asks you for basic documents to verify your identity, address, and financial status. Later they provide you with the loan after executing an agreement.
Secured loan and Unsecured Loan
Ok, what if you need Startup Business Loans? You cannot show any proof for your financial status of the business as it is a startup. Then you can provide your personal income statement, income tax returns paper, etc. However, there is another important factor included in a business loan called a secured loan. Obviously, there is this opposite term as well and it is known as an unsecured loan.
A secured loan is a loan offered for a business against any property. In simple words, the loan seeker should pledge any document and obtain a loan. This is the guarantee to the lender and they can seize the property when the loan seeker fails to repay the loan amount.
On the other hand, unsecured loan as the name implies does not demand any collateral and the loan seeker can avail the loan without pledging any property. Therefore, unsecured loan offers a sign of relief to the loan seekers when applying for Start-up & Small Business Loan.
In this blog let us analyze the best features of unsecured loans and understand why they are considered a safe business loan for small business owners.
Top 10 reasons small business owners feel secured with unsecured loans
- No collateral needed
The first and foremost reason an unsecured loan is secured for small business owners is that there is no demand for any guarantee. This gives a feel of comfort that anyone can dream for a business and not necessarily have any property. A peaceful mind can think more than a restless one and thus unsecured loan makes you feel calm to think and implement your business vision by borrowing money.
- Bad credit doesn’t matter
The basic eligibility criteria for getting a loan include credit score, sales history, experience in business, nature of the business, loan amount required and the purpose of the loan. When you look at the list you will understand that credit score is just one factor that decides on loan approval and hence stops worrying. Even if your credit score is less nothing matters as there are so many other factors that will favor your loan application and you have a better chance.
- Can grow business quickly
In small business, there is a situation when you need money to keep the show running to not lose customers. During these times the unsecured loan gets processed quickly as there is not much of verification required. There is no collateral demanded by the lender and they can quickly verify your papers to process the loan. For instance, at FlexiLoans, we take not more than 48 hours to process your loan application.
- Financing is not restricted
When you go for a secured loan, then you need to give a detailed explanation to the lender about your need for a loan. The lender has the authority to approve or reject your request. On the other hand, unsecured loans are given without any restriction. You can choose to use the loan for any expenses related to your business. It can include paying wages to your employees or raise your working capital or anything else. So there is no need to disclose the reason in detail and that will not be a cause of loan rejection.
- Flexible repayment option
There is no hard and fast rule on the repayment schedule and they can be done on a daily, weekly, monthly, or bi-weekly basis. This will help you reduce your financial burden and you can repay as and when you have cash flow. Here you can feel secured of repaying and adjust on the principal amount.
- Limitless loan amount
When it comes to the loan amount you request, on a secured loan category the amount is decided on the asset you guarantee as collateral. Also, not 100% of the value of the asset will be approved as a loan. However, when you go for an unsecured loan, then you need not worry about the loan limit. You can ask for more depending on your business need. For instance, we pay up to 1 crore and feel free to expand your business.
- No risk
There is no risk or tension about losing any property to the lender in case you are not able to repay the loan amount at the said time. There is no threat and you can discuss to request for an extension in loan tenure and make sure you work towards repaying the loan amount.
- Personalized Solution
Each customer can discuss personally with the lender to check on the interest rate, EMI calculation depending on the loan amount, tenure, prepayment closure, commitment charges, etc. Do not worry about the big picture and you can customize your loan by giving an actual business proposal. You always have the flexibility and there is no one common rule across loan seekers.
- Continuous Business Operations
The continuous flow of income is the lifeline of business but in the volatile market condition, it is not always possible to keep the money flowing. Planning also may not be possible and you may require funding instantaneously. Unsecured loan process being a simple process will help you with money immediately and you can keep the ball rolling.
- Strong bonding with the lender
When you opt for an unsecured loan, initially lender might be skeptical but once you prove your credibility by repaying on time, then you earn the trust. Thereby, not any collateral that confirms your authenticity but your sincerity. This will create a long-term understanding with your lender and you can grow your business without any hassle.
In a nutshell, unsecured loan offers several benefits for a small business owner to start and set up the business to skyrocket the profit. At the last, we would like to confirm that secured loan interest rates are indeed lesser compared to unsecured loans, but at FlexiLoans we can always match the best interest rate for unsecured loans. Get in touch with us to know more.
Given these many edges over a secured loan, we suggest you go for an unsecured business loan to expand your business and stay ahead of the competition.