Collateral-free business loans end the hassle of putting valuable business or personal assets at stake in exchange for credit. They are also quick to get, as your lender does not have to evaluate any assets. Your business can easily get a collateral-free business loan by meeting the eligibility criteria, ensuring that your credit score is good, and completing the application correctly.
The following steps will take you through the process of getting a collateral-free business loan:
Study the lenders online and find a suitable one
Many lenders offer collateral-free loans. Compare them for features, customer service, interest rates, repayment tenor prepayment charges and other charges and the most suitable and affordable one. For example, if your clothing boutique often needs funds at the last minute to cater to urgent orders, you will want a lender that offers a Flexi loan.
Ensure you meet the eligibility criteria
All lenders have eligibility criteria that you need to meet to get your loan. Before applying for a loan, review the eligibility criteria and see if you are a good fit. Matching the eligibility criteria also hastens the loan approval. For example, your boutique will need to have a business vintage of three years and income tax returns and audited company accounts for the past year.
Check your credit score and improve it if necessary
The next step in getting a collateral-free loan is to check your personal or business credit score. This score reveals your or your business’ creditworthiness and impacts the lender’s decision on your loan application. Since you are applying for a loan that does not need you to attach assets as security, this score plays an important role. It tells the lender how you have repaid debts in the past and reveals your current debt as well. If you have a low credit score, you can improve it by paying off any existing debt, reducing the use of business credit cards and not making too many loan applications.
Additional read: What to do if your business' credit score is low
Check the list of documents required
A collateral-free business loan needs you to submit a few essential documents. These include KYC details, business proof, and bank statements. Make it a point to organise these documents beforehand to submit them once you receive the initial loan approval. If you miss out on a document, your application could be rejected. On the other hand, submitting all your documents can help improve the chances of selection and ensure faster approval.
Complete the online application accurately
The online application procedure for a collateral-free business loan is simple. While filling out the application form, list all your details such as PAN, annual turnover, and nature of your business correctly. If you are asked about your current debt obligation, enter the correct number, as the lender will verify your details using your credit score and report. Inconsistencies may lead to your application being delayed or rejected. So study the fields and answer each one correctly.
Additional read: Business loan mistakes to avoid
You can raise money for your business quickly and easily with a collateral-free business loan that also offers you benefits like flexible tenor and easy repayment options.
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