Small organizations may need business loans at any point of time. It is easier to avail a secured loan than an unsecured one. For small-scale enterprises, unsecured business loan is the better option. This form of credit does not need a collateral. So, the borrowers do not have to pledge any properties or assets to the lender to get a loan.
However, like any other form of credit, there are a few risks associated withunsecured business loans as well. This has a comparatively higher interest rate than the traditional loans. Here are a few reasons toavailunsecured business loans for your business –
- Collateral Free Credit
Every business owner needs credit to start a new business or expand an existing one. However, many entrepreneurs do nothave adequate property or assets needed to be pledged for getting a secured business loan. An unsecured loan, on the other hand, are collateral-free and easier for businesses to obtain. Small businesses can opt for this form of credit even if they do not have any collateral.
- Easy Application Process
If you apply for a loan from a reputed lender, the application processcan be easy and hassle-free. They will keep the documentation process minimal. It will become easier for you to compare the business loans, which are offered by other financial institutions. Also, you can apply for the same without putting any extra time or effort.
- A Variety of Loan Products
For an entrepreneur, there are several technology-driven and conventional unsecured business loan options. For example, you can fund your fiscal needs through a term loan, an overdraft, your business line of credit, or a business credit card. Similarly, you can also opt for the technology-driven credit options like the point of sale financing to avail of credit, which will be based on your monthly credit and debit card sales. Choosing the right kind of unsecured business loan will allow you to maintain a positive cash flow.
- Flexible Repayment Terms
The lenders require the borrowers to repay the loans through equated monthly installments. But some of the most sought-after lending institutions will allow the business owners to repay their loans flexibly. They even allow the borrower to choose from different repayment options. Apart from this, the entrepreneurs can also repay the loan early without getting charged for any penalty or foreclosing charges.
- Short Repayment Period
Many financial institutions provide unsecured business loans to the borrowers as short-term credit. The borrowers usually have torepay the loan within one to three years. But the repayment period usually differs from one lender to another. For example, many lenders allow the borrowers to repay their loans through regular instalments. The shorter deadlines usually makes it easier for the borrowers to keep the cash flow positive.
- No Shared Ownership
When a business owner approaches an angel investor or venture capitalists, they often ask for a share in the company’s profits in return of their loan or investments. Many times, the company owners can also lose theownership of their own company in the process of getting funds from these investors. On the other hand, when you apply for an unsecured business loan, you will not have to worry about sharing your ownership or losing it.
- Fast Disbursement Process
The lenders often require additional time for processing and disbursing the secured business loans as compared to the unsecured ones. This is one of the main reasons why entrepreneurs opt for the unsecured business loans. Also, if the lender is reputed, they can disburse the loan amount within 72 hours.
Before applying for an unsecured business loan, the borrower should take note of the important factors like prepayment charges, interest rates, andotherdocuments related to the submission of the loan application. You need to weigh in all the pros and cons of the loan. Also, one of the major things about applying for this kind of loan is that you need to be absolutely confident about the progress of your business.You should be ready to pay the high interests as well.
So, what do you think? Are you ready to apply for an unsecured loan for your business? It is important to conduct research about probable lenders before applying for the same.