An unsecured loan can be availed to entrepreneur, self-employed professionals, Small and Medium Enterprises (SMEs) etc. without any security or collateral, for any of the following purposes:
- Business expansion and growth.
- Buying machinery or equipment or fixed assets.
- Meeting working capital finance requirements.
- Building or constructing office premises or factory building.
- Since these loans are available without taking any security, the rate of interest is generally higher than the secured loans.
- Most lenders require an exceptional rating on your CIBIL score and no bad marks on your credit history. These loans are available at a floating interest rate ranging between 14% to 22%.
- The tenure of these loans generally ranges from 1 to 3 years, in some special cases it may also extend to 5 years.
- The loan amount range from 5 lakhs to 1 crore, in some special cases it may also extend to 5 crores.
- Processing fees of these loans are generally 2% to 3%.
- Age – Most banks disburse business loans to individuals aged between 24 to 65 years.
- Business Experience– Banks will prefer if you have been engaged in sustainable business for at least 5 years, showing stable signs of growth at least for the last 3 years. Some banks give a loan amount up to 60 to 80% of your median annual profits.
- Businesses Eligible– Following businesses are eligible for unsecured business loan:
- Small businesses, SMEs, Small and Medium Corporates.
- Sole- proprietorships, partnership firms, private limited companies, trusts, societies etc.
- Manufacturing firms, traders, wholesalers, retailers, exporters, distributors and resellers.
- Service Providers such as- Chartered Accountants (CAs), interior architects, consultants, interior architect, schools, playschools and educational institutions.
- Self Employed professionals such as- doctors, CA, MBA, engineers & architects and people with professional degrees.
Following documents are required to apply for an unsecured business loan:
- Signed Application Form
- Identity Proof (PAN)
- Residential Address Proof
- Last 3 years ITR (self and business), profit and loss account, balance sheets certified/audited by a CA.
- Last 12 months bank account statement (self and business)
- Certificate and Proof of Business Existence
- Business Profile
- Office address – ownership/ lease / rent agreement/ utility bill
- Can I prepay the loan?
Ans- Pre-payment is not permitted in the first 12 months of the loan. You can pre-pay your loan with pre-closure charges of 5% on the outstanding amount at the time of closure.
- Can I get an unsecured business loan with a bad credit history?
Ans- No, you cannot get an unsecured business loan with a bad credit history. You need to possess a sound credit history to get such loan.
- When should you opt for unsecured business loan and not loan against property?
Ans- In the following circumstances you need to opt for unsecured business loan in place of loan against property:
- You are unable to or not willing to provide a collateral or security such as property or deposit.
- You need money for a relatively shorter period of time.
- You need the money real fast and with minimal documentation within 3 – 15 days.
- You need flexible eligibility norms based on annual turnover or cash profits as opposed to reported income or profits.
- How do I pay monthly repayment of my loan?
Ans- You can repay through monthly ACH facility for which we have a tie up with our banker. No need to sign multiple cheques for the entire tenure of your loan.
- How can I close my loan?
Ans- You have the option to close your loan anytime during your tenure with no foreclosure penalty.