How Women Can Get Unsecured Business Loans

Women have historically been underrepresented in India in different fields, including businesses. They are now breaking down barriers by starting their own businesses and handling finances in different fields. Women’s involvement in MSMEs has also grown from 2.18 crore in 2021–2022 to 3.62 crore in 2023–2024. Like any other entrepreneur or business owner, there is a collection of unsecured business loan for women that help them expand their business.

If you don’t want to put your property or assets as collateral, the women business loan options are sufficient and helpful. They offer financial support without the requirement of specific assets as collateral. Explore how women can get unsecured business loans and strategies to secure them.

What is an Unsecured Business Loan?

The unsecured business loan definition refers to a type of financing that does not require pledging assets like inventory, property or equipment as collateral to get the loan. Businesses qualify for unsecured loans through a creditworthiness assessment as well as an evaluation of business revenue and financial history instead of asset security.

If you are running a business without any strong assets, an unsecured business loan for women makes a perfect choice for you. It is a quick and flexible loan option for women entrepreneurs who need quick cash- emergencies or expansion.

Key Features of Unsecured Business Loans

• The requirement of collateral does not apply to unsecured business loans. This provides the perfect financing solution for women business owners who wish to protect their personal and business property.
• Elimination of collateral leads to faster business loan approval that, in return, reduces your waiting period.
• Unsecured business loan for women display higher interest costs because lenders bear elevated risks beyond those of secured lending.
• The loan funding provides business owners with adaptable financial opportunities like working capital, capital expansion or marketing. 

Secured vs Unsecured Business Loans

Parameters	Secured Business Loan	Unsecured Business Loan
Collateral	Required (property, equipment, etc.)	Not required
Interest Rates	Lower (backed by collateral)	Typically higher
Approval Speed	Slower (due to asset checks)	Faster (less paperwork)
Risk	Higher risk (could lose assets)	Lower risk for borrower
Borrowing Limits	Higher borrowing limits	Lesser borrowing limits
Documentation	Extensive paperwork and evaluation of collateral	Simpler and faster application process
Repayment Terms	Longer repayment periods	Shorter repayment periods

Eligibility Criteria for Women Entrepreneurs

As with traditional loans, the unsecured business loan eligibility for women establishes their credibility for approval. It reassures the lenders of their capability to repay the amount.

Unsecured Business Loan Eligibility for Women

How to qualify for business loan as a woman? You must meet these unsecured business loan eligibility criteria to qualify for the loan:

• Age: 21 to 65 years
• Business Vintage: Minimum 1–3 years of operational history
• Business Loan Credit Score for Women: CIBIL score of 650 or above
• Monthly Turnover: Minimum ₹1–2 lakhs
• Documentation: KYC, PAN, business registration, bank statements, and ITRs
• No Need for Collateral: There is no need for collateral as lenders consider
• creditworthiness and business performance for approval.
• DTI: Low-debt-to-income (DTI) ratio should be under 40%

Required Documentation

• There should be a business plan, especially for startups
• 6-12 months of bank statements
• Tax returns of personal and business plans
• Financial statements, including P&L, balance sheets
• Business license and legal documents

Schemes like Stand-Up India, Mahila Udyam Nidhi, and Mudra Yojana may have additional relaxed criteria for women applicants. By meeting all these requirements, women entrepreneurs can boost their chances of securing an unsecured business loan.

Benefits of Unsecured Business Loans for Women

Unsecured loan benefits range from faster approvals to flexible use of funds. These are the very benefits that make unsecured business loan for women more appealing and practical. Here are all the advantages of unsecured business loans for women you must know:

No Collateral Needed

Unsecured business loans for women do not require any collateral like secured loans. There is no need to pledge your property, equipment or savings as a security deposit. It is a perfect choice for women who do not want to risk their personal and professional assets.

Quick Approval Business Loan

Whether you are running a seasonal or year-round business, there will always be a need for immediate financing or funds. A lengthy approval process proves to be impractical here. If you require immediate access to funds, unsecured business loans are ideal for you as they follow a simple application process with less documentation and faster approval.

Flexible Use of Funding

Unsecured funds offer greater flexibility in their usage compared to other business loans since they enable organizations to spend the financing on any legitimate need. You can spend unsecured business loans on the following:

• Hiring & payroll
• Marketing & advertising
• Inventory or supplies
• Renovations or expansion
• Bridging cash flow gaps

Builds a Strong Business Credit

Proper management of unsecured loan debts generates three key advantages:

• Establish a strong business credit profile (critical for larger loans later)
• Improve eligibility for better terms on future financing
• Gain credibility with lenders and investors

Minimal Documentation Procedure

Unsecured business loan for women require fewer documents than secured loan types. The procedure is greatly streamlined by requiring the applicant to submit simply a completed application form, all KYC papers, and income-supporting documentation for verification.

Accessible to a Broad Spectrum of Borrowers

A diverse spectrum of borrowers with varying credit histories can get unsecured loans. In general, unsecured loans are more expensive for those with fair or excellent credit scores between 580 and 750 than for those with scores greater than 750.

Steps to Apply for Unsecured Business Loans

Unsecured business loans offer many benefits over secured loans, but first, you must know how to apply for unsecured business loans. Although the unsecured business loan application process follows simple steps, missing out on any can lead to loan application rejection. Follow these steps to get business loan easily:

Step 1: Find the Right Lender

• Start by investigating all possible lending options, which include traditional banks together with credit unions alongside online lenders and women-oriented funding programs.
• Perform a thorough assessment of interest rates along with repayment terms and fees among different choices.
• Investigate institutional loan programs dedicated to supporting female business owners.
• Use loan combination tools to get the unsecured business loan for women with the best terms.

Step 2: Check Your Qualifications

• The loan requires applicants to demonstrate a personal credit score of at least 600.
• Minimum 2 years of business vintage 
• You must demonstrate that your annual business revenue meets or surpasses ₹2 lakh.
• The debt-to-income ratio should remain below 40% for approval purposes.

Step 3: Gather Your Documents

• Financial Records: 6-12 months of business bank statements, last two years of personal and business tax returns, Profit & Loss statements and balance sheets.
• Business Documents: Business licenses and registrations, commercial lease agreements and more.
• Additional Documents: A well-prepared business plan, customer contracts or purchase orders, marketing/growth strategy document and 6-12 months of business bank statements.

Step 4: Submit a Strong Application

• The application needs all fields completed exactly as they appear on the form, with no approximate information.
• Demonstrate in a detailed description how you intend to allocate the funding sources.
• Organize all mandatory documents correctly according to specified formats.
• You can find better success with your application by submitting it first thing during the workweek because lenders have fewer duties at this time.
• Small mistakes during the double-checking process can lead to substantial delays in this stage.

Step 5: Final Approval

• The lender provides quick responses to all additional inquiries.
• A thorough analysis of all loan details must occur before executing the loan documents.
• Learn every detail about the repayment process terms.
• Lenders disburse the loan amount into your account between 1 and 7 business days from the approval date.

Women entrepreneurs who follow these steps will be able to obtain funding for their business growth with confidence.

Top Lenders Offering Unsecured Business Loans for Women

The best part of applying for unsecured business loans for women in India is that you have access to many lenders. By choosing the right business loan and lender, you can expand your business operations without providing any collateral. Here is a list of the best lenders for women business loans, together with governmental initiatives established to aid female business owners:

Best Lenders for Women Business Loans

Lenders	Loan Amount	Interest Rate	Tenure
FlexiLoans	Up to ₹10 crore	Starts at 1% per month	Up to 5 years
State Bank of India (Stand Up India)	Up to ₹1 crore	12.15% p.a. onwards	Up to 7 years
Bank of Baroda (Baroda Mahila Business Loan)	Up to ₹50 lakhs	8.75% p.a. onwards	Up to 5 years
Punjab National Bank  (Udyogini Scheme)	Up to ₹10 lakhs	9.25% p.a. onwards	Up to 5 years
Lendingkart (Unsecured Business Loans)	Up to ₹2 crores	16% – 24% p.a.	6 months to 3 years
MUDRA Loan for Women (PMMY)	Shishu: Up to ₹50,000Kishor: ₹50,001 – ₹5 lakhsTarun: ₹5 lakhs – ₹10 lakhs	7% – 12% p.a.	Up to 7 years
Stand Up India Scheme	Up to ₹1 crore	Starting at 9% p.a.	18 months
Annapurna Scheme (For Women Catering Businesses)	Up to ₹50,000	Subsidized rates	Up to 3 years

Challenges Women May Face When Applying for Unsecured Business Loans

Many women encounter certain challenges in getting unsecured MSME business loans. The credit score challenges for women entrepreneurs often tops the list. Women still fail to create strong credit profiles because they either depend financially on others or lack access to formal credit systems.

Credit Score Challenges for Women Entrepreneurs

Women experience poor credit scores as their financing records are limited. This is why you must establish credit through small loans or credit cards. To build credit score points individuals should pay all bills on time along with maintaining minimal credit utilisation.

No-Collateral Dilemma

Some lenders avoid providing loans because they do not offer tangible collateral to back their financial requests. Good revenue records combined with well-established cash flow projections often serve as compensation for lenders in overcoming this obstacle. Businesses that work with lenders who have experience serving female-founder startups increase their chances of loan approval.

Women Business Loan Bias

Certain lenders continue to believe in traditional stereotypes about business competency among women. The application process becomes more effective when it includes solid financial documentation that reduces stereotypical prejudices. Women who look for financing options with women-friendly characteristics and programs access fairer chances for success.

High-Interest Rate Challenges

Acquiring unsecured often necessitates paying higher interest because lenders take on greater financial risks. Looking for interest rates that match the market offers vital benefits to all borrowers. Enhancing your credit score and utilizing loans with government guarantees will lead to better loan conditions as time progresses.

How to Improve Your Chances of Getting an Unsecured Business Loan?

Although challenges continue to persist when applying for a loan, you can still improve chances for unsecured business loans. If you are wondering how to get business loan for women, follow these tips for women entrepreneurs loan approval:

Boosting the Credit Score

You can build your credit score by taking personal loans or using credit cards and then paying the dues and bills on time. It is advisable to keep credit card balances under 30% of their limit. Moreover, checking the yearly reports can reduce the chances of errors.

Winning Business Plan

A business plan holds the utmost importance when applying for the loan as it demonstrates your business’s viability and financial projections to lenders. Lenders see realistic growth plans as an indicator of sound business strategy, increasing your chances of getting a business loan.

Clean Financial Records

Organized financial books build the trust of lenders and increase your chances of getting an unsecured business loan. This is why you must maintain monthly profit/loss statements, updated tax fillings and separate business or personal accounts.

Exploring Women-focused Programs

There are several banks and government schemes that offer special loans for female business owners. The government has also launched schemes like MUDRA, which provides low-rate funding options.

Strong Cash Flow

Consistent revenue proves that users can repay the loan amount. It highlights steady monthly income, client contracts and growth trends.  When the credit needs help, a trusted co-signer with a good credit score is essential. It strengthens the application.

Conclusion

According to the Ministry of MSME’s Udyam Registration Portal (URP), women-owned MSMEs make up 20.5% of all MSMEs registered on the Portal. This not only shows the notable contribution of female entrepreneurs in the economy but also the will of women who are changing the country’s entrepreneurial narrative. If you are on the same path but struggling to get a loan, you can apply for an unsecured business loan for women.

If you want to look for more business loan options for women, you can check out government schemes, NBFCs, and fintech lender options. These loans have quick approval and flexible terms and do not require anything to back the loan, making it a great option for a female business owner who is looking to develop and expand their business.

FAQs about Unsecured Business Loans for Women

Can women get unsecured business loans without collateral?

Absolutely! Many lenders provide women with unsecured business loans, meaning they do not need collateral. Approval is contingent on a few elements, such as credit score, business revenue, and repayment history.

What are the interest rates for unsecured business loans for women?

Interest rates for unsecured business loans differ among lenders but are generally from 10% to 24% per year. For women entrepreneurs, there are lower rates through government schemes.

How long does it take to get an unsecured business loan?

If the documents are in order, the approval process with digital lenders is quicker and will only take 24-72 hours. For traditional banks, it will take 7-14 days for approval.

Are there government schemes for women entrepreneurs?

Yes! There are lower-interest loans for women under programs such as MUDRA Yojana, Stand-Up India, and CGTMSE, along with relaxed eligibility. 

Can startups apply for unsecured business loans?

Yes, but lenders require a strong business plan. It includes a co-applicant or a higher interest rate if they decide to lend money to individuals without established financial histories.