Is an Unsecured Loan Right Option to fund the Growth of Your Business?

Updated on: 14 Dec 2021 // 20 min read // Business Loans
Author :(545 posts)

The world of finance is a circuitous one and the loans, and can be a bit confusing to manoeuvre. In order to understand everything the right way, especially if you are a small business owner, you have to be extremely well read. If you own a small business, it is very vital for you to have the right information about unsecured Business Loan. This article gives you all the information about what Unsecured Business Loans are and whether they are the right choice to fund the growth of your business.

Apply for Business Loans Online in India

What are Unsecured Business Loans?

As you may have guessed from the name, unsecured Business Loans are loans that you have a loan without securing any asset. In other words, there are no collaterals and you do not have to mortgage any property or asset as a security to the bank. The unsecured Business Loan is provided to the small business owner based on his creditworthiness and whether they are able to repay the loan. Also, these types of loans are mostly short term so that the lender’s risk is minimised.

Features of the Unsecured Business Loans:

  • These loans do not require any assets or collaterals as security.
  • The interest rates are much higher.
  • The loan amounts are usually lower because a lot of it depends on the repayment capacity of the lender.

  • The tenure of the loans is also much lower because that will reduce the risk of the bank.

Types of Unsecured Loans:

There are two types of unsecured loans:

1. Term Unsecured Loan:

In this loan, the loan is set to a particular duration and has a typical monetary amount.

2. Revolving Unsecured Loan:

This loan is similar to a Credit Card and can be paid and then spent again.

If you are still not convinced that you could take an unsecured Business Loan like an Aditya Birla Business Loan, read the major benefits of taking an unsecured loan:

  • Approval time is very Less:

Since this loan does not require you to guarantee any collaterals or assets, the turnaround time for the disbursal of the loan is very less. In some types of loans, the amount is in your bank account in less than seven days.

  • You will have knowledge about the exact amount needed to be repaid:

In such a type of loan, you know your monthly payment and repayment terms. There are no hidden terms or surprises and you are never caught off-guard.

  • Fewer consequences of default:

There are fewer consequences of default in such type of loan. For starters, you do not have collateral on stake. The bank or the lender doesn’t really have anything to take away from you. In the case you file for a bankruptcy, the lender or the bank will still not have a choice and cannot punish you. They can only have a court order against you.

  • You have more freedom:

The first and foremost thing is that an unsecured loan does not have a definition of what you could do with the money. It is not specified, and hence, you could use the money in a wide variety of ways. You can use it to pay off a high interest credit card debt, or buy equipment for your business, expand your office space, and so on, but you do not need to specify the bank why you are taking the loan and this makes everything a lot easier.

  • Improving your credit score:

A Personal Loan is a type of unsecured loan and if you take this loan to pay off a high interest Credit Card debt, your credit score will becomes better thus making you eligible to get more and better loans.

The biggest advantage of an unsecured Business Loan that makes it a favourite with many of the owners is the fact that it does not require any collaterals and hence, the owners can breathe easy even when they might feel that their business is not doing that well. At least they know that no of their other properties are at stake. Hence, a lot of them prefer to take unsecured Business Loans even if their credit interest rates are slightly higher than the other types of loans available in the market.

Also Read: 5 Business Expansion Ideas and Ways to Fund Them

To apply online for Credit Cards, Secured Loans and Unsecured Loans, visit www.mymoneymantra.com, the leading online lending marketplace that offers financial products from 70+ Banks and NBFCs. We have served 2 million+ happy customers since 1989.

Apply for a Business Loan