Everything About Unsecured Business Loan you wanted to know

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%.

Eligibility Criteria:

  • 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:
  1. Small businesses, SMEs, Small and Medium Corporates.
  2.  Sole- proprietorships, partnership firms, private limited companies, trusts, societies etc.
  3.  Manufacturing firms, traders, wholesalers, retailers, exporters, distributors and resellers.
  4. Service Providers such as- Chartered Accountants (CAs), interior architects, consultants, interior architect, schools, playschools and educational institutions.
  5.  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


  1. 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.

  1. 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.

  1. 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.
  1. 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.

  1. How can I close my loan?

Ans- You have the option to close your loan anytime during your tenure with no foreclosure penalty.

Varun Baid

Varun Baid

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About Me

I’m a Commerce Graduate & CFP Professional, engaged in blogging since 3 years. I’m not affiliated with any financial product. The purpose of writing blog is to spread financial awareness and help people in achieving excellence for money. Please note that the views expressed on this Blog/Comments are clarifications meant for reference and guidance of the readers to explore further on the topics. These should not be construed as investment advice or legal opinion.

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