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What is Unsecured Business Loan?

Unsecured Business Loan

Unsecured Business Loan

A loan that is issued to the borrower to start or enhance his business without the use of any collateral and based on his own creditworthiness is called as unsecured business loan.  The borrower is not required to pledge any of his properties or assets.  To be approved for an unsecured business loan the borrower must generally have high credit ratings. The credit rating is the process of assessing a person’s ability to fulfill his financial obligations.

Features of Unsecured business loan

  • These loans are applicable for a wide range of users from larger business enterprises to small scale self employed businessmen.
  • Loan amount up to 15-30 lakhs can be availed based on the business and the bank that is accessed for a loan.
  • The repayment options are very flexible and it ranges from 1-5 years for different banking sectors.
  • As compared to other sources of finance, the unsecured business loan carries a high rate of interest.
  • A borrower can obtain finance at either a fixed or a variable interest rate. This option is highly appreciated by the users as they get an option over choosing their Interest rate fixation.
  • Unsecured loans are fundamentally short-term loans as they can be repaid in some years.

Benefits of Unsecured Business loans

  • Borrowers get flexibility over paying their monthly payments or interests. Thus the borrower gets an opportunity to pay more when his business flourishes or pay less when his profit rate deduces.
  • It proves to be a risk free method of raising funds for the business, since there is no threat of losing any collateral even in the case of bankruptcy.
  • It involves less documentation and also the processing is considerably faster. So borrowers can opt for unsecured business loan at times of dire financial requirement.
  • Even businessmen with poor credit record can get an unsecured business loan, but he may have to pay a higher rate of interest.
  • Since they are short-term loans, the borrower can get over the debt obligation quickly.
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