If you are a budding entrepreneur and are ready to set up your own business, now is the time. For every start-up and small business, you will need sufficient funds available through Business Loans. Traditional Business Loans require you to have some collateral or assets before getting the loan. However, you can get a collateral-free loan if you are starting your business and do not have many assets. If you are wondering what a collateral-free loan is, read below to find out more.
What Is a non-collateral Business Loan?
A non-collateral Business Loan is one in which lenders will let you borrow money without requiring any assets or collateral. Another term for this is an unsecured loan. You get the funds to start your business without having to put anything up as collateral. These fast Business Loans are also good as they offer:
- Low-interest rates
- Faster approval
- Options for low credit
- Less documentation
What Are The Steps To Getting A collateral-free Business Loan?
There are four significant steps to getting fast Business Loans:
Review All The Lenders
The first step is to review all the different lenders. You need to check out your options and go with trusted lenders. You should also look at the loan terms and approval rates to see if there are any conditions. For instance, some financing institutions offer disaster loans for businesses in an economic crisis or natural disaster. Other online lenders help you with equipment financing so you can buy all your initial equipment. These lenders generally have different credit eligibility and conditions from alternative lenders. That is why it is necessary to see what a collateral-free loan offers.
Check Your Business’ Eligibility.
Before applying for these loans, you must check if your business is eligible. For instance, you must meet the following criteria:
- Aged between 22-62
- An Indian citizen
- Proof of business operations for three years
- Good credit score
You can improve your eligibility for a Business Loan by increasing your credit score. You can do this by paying credit card bills on time. Also, update your financial sheet regularly and keep track of your cash flow. Finally, you should check your overall cash flow regularly to know how much of a loan you need.
Keep All Your Documents Prepared
To apply for a fast Business Loan, you must also have all your documents. It will ensure speedy approval, and your loan could be in your account the next day. Here are some mandatory documents that you must organize for your loan:
- PAN card
- A driver’s license/Aadhar card/passport
- Bank statement for the past year
- Income tax returns for three years
Ask the lender if they need any additional documents in advance. Again, this will be easier to organize in advance rather than having to run around at the last minute.
Fill Out The Application Form
Once you understand a collateral-free loan and have reviewed the lenders, you can fill out the application form. Make sure you review the complete form and check for any hidden fees or terms.
You must verify:
- The annual interest rate
- The loan term
- Payment schedule
- Yearly percentage rate
It is necessary to check how long it will take for you to pay back your loan. Estimate your costs with interest and fees to know how much you borrow. It is an unavoidable step before you sign on the dotted line. You must not make any mistakes or be inconsistent, or you could get rejected for the loan.
Increase Your Chances
To improve your chances of getting approved for a collateral-free loan, follow the steps listed below:
- Create a sustainable business plan so that you can amass enough money to repay your loans on time.
- Check the company’s credit score and history and take steps to improve it.
- Talk about how you will use your funds with the lender to gain their trust.
- Always opt for a trusted bank lender to get the loan amount you want without hassle.
After understanding what a collateral-free loan, you can apply for one for your business. Use the above four steps and start your application process to give your business a kickstart.