Every business, no matter how well planned, runs into unforeseen events that requires immediate cash expenditure. Do you know that the lack of cash flow is one of the main reasons for a business to fail? Business owner may need funds to maintain daily operations, purchase raw material, clear utility bills, pay wages or to meet any other unexpected expenses. In such circumstances, the turnaround time creates the major difference. Of all the types of business funding options available, the unsecured loan is the first choice of entrepreneurs looking to raise finance for meeting the business working capital needs.
Why Unsecured Business Loan?
In nutshell, unsecured loan(personal loan, signature loan) is the most straightforward type of financing as it is not backed by asset as a collateral. For new business and start-ups with little or no collateral to offer, the unsecured loan is the ideal choice.However, before you apply you must clearly identify the purpose of the debt and revenue it will bring towards your business growth. Your decision should circle around two fundamental metrics – amount invested, and revenue generated. Thus,choose a lending platform that offers the lowest APR (annual percentage rate)on your business loan.
However, this type of financing embodies more risk to the lender. If a borrower default, there is no collateral to seize. For this reason, it is a good option if you want to limit the personal risk in the investment or want lower rates on the small business financing. Listed below are some benefits of unsecured business loan other than being collateral free:
It is a function of your creditworthiness
Since an unsecured loan does not require any collateral, it is rather based upon the creditworthiness of the borrower. If you have a decent credit score, it might be easier for you to qualify for this type of financing.
It takes less time to apply
While lending platform providing unsecured loan do not need to assess the value of physical asset, the loan application can be completed online. Some peer to peer lending platforms have further streamlined the credit assessment procedure by making entire documentation to lending procedure online. Without any branch visits your loan amount is disbursed into your bank account.
You are building your credit history
If you manage to efficiently pay all your EMIs on time, it helps to build your further credit ability and credit score. Ultimately, it is easier for you to Apply for Business Loan Online with reputable lenders.
No restriction on end use of loan amount
Thanks to the ease in processing and the flexibility it offers. When a business owner applies for small business financing, the lending platform does not impose any restriction on the end use of the credit amount. The borrower can freely utilize the money on any sort of operation and maintenance task.
No risk of losing your asset
Major banks and NBFCs often turn to seize asset in case borrower defaults. Since with an unsecured business loan, since there is no collateral hypothecated, it means there is no possibility of losing your property.