Today in the world of ever-increasing competition, as well as the race to kick-start the next big start-up, it is becoming increasingly essential for businesses to have excess funds on their disposal. This is especially true for small and medium enterprises, as they often need modest sums of money either to meet their operational expenses or to fund the acquisition of new assets. Either way, the one-stop solution to their search for money comes in the form of business loans.
While there are numerous types of credit, when it comes to procuring excess funds to propagate a business such as peer-to-peer lending, Credit Cards for business and even Personal Loans; a vast majority of enterprises depend on the considerably affordable Unsecured Business Loans for their needs.
Primarily, an unsecured Business Loan is a debt offered by a financial institution, to a self-employed professional or a business owner, which is required to be repaid with interest, in the form of equated monthly instalments (EMIs), in a pre-determined span of time. This credit is offered on the basis of the repayment history and the credit score of the borrower and hence doesn’t require the borrower to offer any collateral against the loan amount. However, lenders do conduct a quick check of the borrowers’ sources of income, to ensure their ability to repay the amount.
While every bank or financial institution has a distinct application process, more often than not you will need a written application for the loan stating the amount that you are willing to borrow and the reason for the same. Besides, you will need to submit a few documents, especially if you do not have an existing account in the bank that you are applying to.
Here is the list of documents that you may be asked for when you apply for a business loan. It is, therefore, recommended that you keep them handy.
In addition to the above, you will need 1 or 2 passport-sized coloured photographs, as well as proof of investments, if any. Then again, if you are already servicing a loan, you must furnish a copy of the sanction letter regarding the same.
Since a vast majority of lenders now accept online applications, the entire process is highly automated which not only makes the loan approval swift but also ensures that the disbursed amount get reflected in your account within a few days. While these prove to be exceedingly advantageous, one limitation to this process is the fact that you have little or no power to instigate the lender’s decision in your favour, even when you have some apt explanations for any drawbacks in your application or repayment history.
As is with any financial decision, your call to procure a Business Loan must also be well informed, and well thought out, to this end, it is essential that you know and understand the following aspects.
We hope that you now have all the information you could possibly need before you apply for a business loan and that this guide serves as your go-to reference when you wish to seek a credit for your business needs.