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Most of the banks and NBFCs offer unsecured business loans in which no collateral or security is to be provided by the borrower. However, it becomes tricky for some borrowers, as few of the financial institutions require collateral in the form of property, raw materials, stock, machinery or equipment for specific loans related to business activities.
Borrowers prefer to opt for business loan without providing any collateral. Therefore, they can avail business loan without security. As such loans are quite risky from a lender’s perspective; their interest rates are comparatively higher than secured loans.
Thus, there are two types of Business Loans:
- Secured Loans – To avail this business loan, borrowers need to pledge collateral
- Unsecured Loans – No security or collateral is required by the financial institution
Where to get Loan for Business without security?
Private/Public sector banks
Almost every public and private sector bank offers business loans without security to its customers. Some of the popular banks include
ICICI Bank
HDFC Bank
State Bank of India (SBI),
Axis Bank
Kotak Mahindra Bank
Bank of Baroda
Punjab National Bank (PNB)
Yes Bank
Syndicate Bank and many more
Non-banking Financial Companies (NBFCs)
Unsecured loans are also provided by NBFCs to businesses across India that includes
Lendingkart Finance
Indifi Finance, etc.
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How to get a business loan in India without collateral or security?
To apply for an unsecured business loan without collateral or security, you can visit paisabazaar.com to check and compare from loan deals offered by various private and public sector banks and NBFCs.
What are Loans for Business without Security?
A business loan that is taken either from a bank or any other NBFC, without the guarantee of collateral is called an Unsecured Business Loan or a Business Loan without Security.
Eligibility Criteria
The eligibility criteria may differ from lender to lender. Following are the factors that you will need to follow to check your eligibility for getting PSB loans:
- Age Criteria: Minimum 18 years and maximum 65 years
- Business existence of minimum 6 months
- Business should be in profit
- Good CIBIL score: 700 or above
- Minimum annual turnover: Depends on lender
- The applicant should be an Indian citizen with no criminal background
- Applicant should have no previous loan defaults
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Features of Loan for Business without security
1. No collateral required
The very first characteristic of unsecured business loan is that it does not require collateral or security. This feature makes it ideal for Small and Medium sized enterprises (SMEs) that do not own substantial assets. Businesses belonging to the service sector are ideal to secure an unsecured loan.
2. Relaxed criteria for loan approval
Business loans without security are very easy going. Even Non-banking Financial Companies (NBFCs) offer business loans online to make it more convenient for you. The loan procedure is quick and gets approved immediately without excess documentation. Once approved, the loan amount is disbursed in your account within a few working days.
3. Higher rate of interest
Lending unsecured business loans is a risky proposition for lenders and therefore, its interest rates are higher than those applicable on secured loans. Lenders often negotiate the rate of interest based on several factors like the amount of loan taken, annual income of the applicant, employment status and other details.
Checklist of Documents required for Business Loan without security
When applying for a business loan, you will need to submit the following documents:
- Duly filled loan application form
- Self-written Business plan
- Passport-sized photographs
- Applicant’s identity proof
- Applicant’s KYC documents
- Business address proof
- Business establishment and vintage proof
- Last 12 months’ bank statement
- Last 6 months’ salary slips
- Last 1 year’s ITR
- Any other required document by lender
Key points to remember
Certain things you should take into consideration before you opt for an unsecured business loan.
Apart from banks and NBFCs, there are many other lending institutions that offer unsecured business loans. They can be availed quickly and are usually of short-term in nature.
FAQs
Q. Is it really possible to get a business loan without collateral security?
Ans. Yes, unsecured business loans are loans offered without any demand of collateral or security. Almost every banking and financial institution have this feature to offer at competitive interest rates.
Q. What is the best way to obtain an unsecured business loan?
Ans. The best way to avail an unsecured business loan is to visit paisabazaar.com or the financial institution’s official website to fill in and submit the loan application form online.