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Complete Guide on Unsecured Loans 2022 : Features, Eligibility, Documents, Steps to Apply

Unsecured loans are the types where the loan amount is sanctioned with an interest rate of about 16% per annum by the banks and NBFCs with a maximum loan amount of Rs. 2 Crores. But, the interest rate changes as per the loan amount and profile of the business offered by the banks and NBFCs.

Tax Benefit

Upto Rs. 46800

Tax Benefit

Upto Rs. 46800

Tax Benefit

Upto Rs. 46800

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Unsecured Loans




 

Businesses irrespective of the size come across the need for funding at some point or the other for the better functioning of the business. Many micros, small and medium enterprises that need to maintain their working capital, increase productivity by expanding their business, or buy types of machinery for better efficiency need financial support which is offered by many banks and NBFCs in the country. Unsecured loans are the loan types where there is no need to submit any security documents or collateral documents in order to avail of the business loan. As there is no need to submit the collaterals the risk remains high for the banks and NBFCs.

 

Unsecured loans are the types where the loan amount is sanctioned with an interest rate of about 16% per annum by the banks and NBFCs with a maximum loan amount of Rs. 2 Crores. But, the interest rate changes as per the loan amount and profile of the business offered by the banks and NBFCs. The unsecured loan interest type depends on many factors one of which is the financial documents and others such as CRS score, annual turnover, and many others. Unsecured loans are generally offered to businesses that intend to expand the business; or start a new business, which serves as working capital for maintaining the business needs.

 

Types of Unsecured Loans offered to businesses:

 

There are many types of business loans that are offered by many banks and NBFCs which has different types depending on the type of businesses in the market. These unsecured loans need to be repaid in the specific time period as agreed by the lenders and borrower depending on the loan amount. Some of the types of unsecured loans are as mentioned below:

 

Working Capital Loan: The working capital loan is the type where the loan amount is sanctioned that can be used by the business in order to meet the demands of the day-to-day life of the business and this loan type is approved by the banks based on the creditworthiness and the affordability of the loan repayment of the business.

 

Overdraft loan type: Overdraft loan is the type of loan which is an unsecured loan and can be availed by the business owners in parts that are offered by the banks and NBFCs. The interest amount is only charged depending on the amount that is used by the business from the sanctioned amount.

 

Loans under government scheme: There are many schemes of business loans laid by the government of India where a low-interest rate is charged by the businesses. The different types of government loan schemes include the MUDRA loan which is also called the Pradhan Mantri MUDRA Yojana (PMMY), Stand-up India, startup schemes, Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), and SIDBI’s Loans or MSME’s loans in 59 minutes and so on.

 

Merchant Cash Advance: Merchant Cash Advance is the type of unsecured loan where the loan depends on the credit card sales deposited in the merchant’s account. The Merchant Cash Advance loan amount is decided on the transactions done by the credit card swipes monthly by the business.

 

Micro Loans: Micro Loans are the type of unsecured loans that are mainly provided by Micro Finance Institutions (MFIs) which are basically to meet the urgent demand of the business. The loan amount offered under this loan is Rs. 5,000 to Rs. 2 Lakhs depending upon the type of business.

 

Business Credit Cards: Business loans are provided by business lenders under the business credit card. This type of business loan is used by businesses in order to meet the working capital of the business to fulfill the business needs.

 

Eligibility criteria for opting for the Unsecured Business loan:



 

The eligibility criteria for the unsecured loans are to be fulfilled in order to avail of the unsecured loan by the banks and NBFCs. The below-mentioned factors are to be considered to be eligible for the unsecured type of loan:

 

Age: The age of the applicant at the time of applying must be a minimum of 18 years and a maximum of 65 years.

 

Credit Score: The credit score plays a vital role in eligibility as the high chances of getting desired loan amount highly depends on the CRS score. The Credit score of more than 750 is considered high.

 

Business Experience: The business must be registered for at least one year before applying for the unsecured loan and must be in operation from the same location.

 

Applicant occupation: The applicant must be a salaried employee and should possess regular payslips.

 

Documents required for the Unsecured Business Loan:



 

There are a few documents that are required to be submitted when applying for unsecured business loans. Some of the mandatory documents required are as mentioned below:

 

Application: The application form along with passport-sized photographs and correctly filled information.

 

Identity Proofs: To check the identity of the customer Passport, Voter ID, or Aadhar card need to be uploaded.

 

Address Proofs: For the address proof any of the documents with the residence address like the Driving License, PAN card, or Utility bills such as electricity bills can be submitted.

 

Income Documents: Documents related to income documents are the 2 years ITR with income and also profit and loss related to the business from the last 2 years.

 

Proof of continuity: Proofs such as sales tax certificates, ITR certificates, and trade licenses are to be submitted.

 

Financial Documents: Bank statements from the past 3-6 months have to be submitted at the time of applying.

 

Business Establishment Document: The documents related to business such as the business registered document with the business address and vintage proofs have to be submitted by the applicant.

 

Features of Unsecured loan type:

 

There are some highlighted features for the applicants opting for the unsecured loan. Different banks and NBFCs offer different features and criteria and some of the features common among them are as mentioned below:

 

  • In the unsecured loan type, there is no need to submit any security or collateral documents at the time of applying for the loan.

 

  • The unsecured loans are offered based on the creditworthiness or credit score or repayment history of the business and applicant.

 

  • The business for which the unsecured loan is applied must possess 2 years of operation in the market with a good profit profile.

 

  • Depending on the business need and size of the business, the loan amount is offered between Rs. 10,000 to Rs. 1 Crore.

 

  • The repayment option for the unsecured loan is flexible and can vary from 1 to 5 years depending on the loan amount sanctioned.

 

  • The unsecured loan can be beneficiary to the businesses such as start-ups, MSMEs, SMEs, retailers, traders, manufacturing industries, private and public companies, and also partnership businesses that can opt for the unsecured loan type.

 

Steps to be followed for applying for an Unsecured Business loan:

 

There are certain steps to be followed in order to apply for an unsecured business loan. The step-by-step procedure to apply for the loan is to follow as mentioned below:

 

Step 1: Fill in the details of the application form such as the desired loan amount, employment status, annual turnover of the business, and contact details such as phone number and email ID.

 

Step 2: After filling in all the details, click on the check box to agree to the terms and conditions.

 

Step 3: In this step, mention the business details such as the type of the company, nature of the business, annual profit of the business, and any such related business details.

 

Step 4: In this step, after submitting the details the bank or lender representative will call back the applicant for other formalities.

 

Step 5: When the application is approved, the loan amount is sanctioned in the bank account given in the application within the mentioned period of time.

 

To know more details on Unsecured Loans.  You can email contact@startupyo.com or call at  +918886666821.


Faq's

To avail of the unsecured business loan, check all the banks and NBFCs on the digital platform that offer the loan, and by comparing them all one can opt for the best suitable scheme.

Yes, the unsecured loan can be taken for start-up businesses but the interest rate will be high as there will be no past history of the business loan repayments and credit score.

The unsecured business loan amount depends on the income of the applicant and business profits. The maximum amount that is offered under the unsecured business loan type is up to Rs. 2 Crores.

The interest rate offered under the unsecured loan type is relevantly high when compared to the secured loan type as there are no collateral or security documents submitted under the unsecured loan.

The credit score is very important in getting an unsecured business loan, the credit score of above 750 is considered high enough for loan sanctioning.

Businesses such as trading, manufacturing industries, self-employed businesses, and so on can avail of unsecured business loans where there is no need for security documents to be submitted.

If the applicant fails to repay the loan amount within a specified time by the lenders, then the business is set to be in default and the loan amount then be recovered by the orders of the court and this will cause damage to the credit score of the business.

The main advantage of taking the unsecured loan is that there is no need to submit the security or collateral document in order to avail loan amount to meet the business expenses.

There are many types of unsecured loans available in the market such as personal loans, student loans, and credit cards.

Banks and lending institutes offer unsecured loan amounts for business owners who do not intend to submit security or collateral documents. As borrowers don’t lose assets in case of default, many businesses prefer to go for unsecured loans.