6 Scenarios when SMEs will consider Unsecured Business Loans

Financing becomes extremely important for small and medium scaled organizations to function properly. Business organizations are in dire need of working capital to sustain in the long run and to compete against the rivals in this vehement competition. SMEs mostly concentrate on running their daily operations and often pass through an obstinate credit crisis. SMES constantly require financing to expand their business, managing daily expenses and to prostrate challenging monetary impasse. The economy is impossible to predict and the rise or demise of cash-flow depends on several ingredients. Suppose you are a manufacturer of medical goods and you supply medical equipment to businesses in your city. What would happen if the cost of a raw material increases overnight? You will increase the price of your goods which in return will hobble your overall conversion rate. Small and medium scale businesses are mostly bothered by monetary resources that would keep their business upward running. As a micro business owner, if you’re starting out or in a state to calibrate your business needs, then you might surely be on the quest for capital to embellish your enterprise. That's when third-party financing or a business loan comes into play. But as they say, everything comes at a price, what happens if you don't have a price? What if you don't have enough assets to trade for or if you are not at all interested in securing a loan against a guarantee? May it be your tangible assets or real estate properties. Well, that when, unsecured business financing, and unsecured business loans specifically, play an important role.

About Unsecured Business Loans Unsecured business will be issued against your business without demanding any collateral from you. The loans are sanctioned based on your credit score and credit ratings. The traditional financial institutions employ various computational methods to determine your creditworthiness. It generally involves a greater risk to the creditors since no collaterals are guaranteed against the loan amount. The chance of funding is highly influenced by pivotal factors like phenomenal rating on your CIBIL score, no negative remarks on your credit history and financial records of the business from the time of establishment.

There can be a handful of scenarios when SME starts considering Unsecured Business Loans

Lack of Valuable Assets to tradeoff Most SMEs feel disinterested in jeopardizing their assets in procuring a business loan. Some don't have enough assets to trade as credit guarantees against the loan. SME financing through unsecured business loans does not require any collateral. There is no need for the borrower to grubstake his assets at the time of securing the loan figure. Unsecured loans allow the borrower to obtain capital while avoiding the loss of a previously held asset. SMEs don’t have to put their assets on the line to get approval for business loans.

To avert protracted documentation procedure The Loan Application for securing an unsecured business loan does not invite much difficulty. There are lesser chances of printing and unprecedented delays. With the emergence of judicious e-lending platforms like CapitalFloat, all documents can be uploaded digitally and the documentation process followed for the complete lending process is expedited without any hassle.

To Achieve Faster Access to Funds For most SMEs, funding becomes critical to serve daily business requirements. The deficit in the funds might strangulate the prospective growth of the enterprise. Traditional loans sanctioned by financial organizations consume a lot of time to get disbursed. The introduction of innovative e-lending companies in India made it possible to secure funds in a matter of time. The loans are swiftly processed by following the legitimate loan approval procedure and by accrediting the approval process in less time. SMEs who require funds to meet the expected and unexpected expenses ranging from wages of workers to machinery costs are most likely to elect unsecured loans over secured loans. are easily available and ideal for preventing any disruption to operations. Consummate Usage of Funds

SMEs considers raising capital for comprehensive applications in business. For a secured business loan, the financial projection for utilizing the loan amount must adhere to the objective of the loan that has been provisioned at the time of obtaining the loan. Most SMEs does not possess a proper plan for fund management. In such a scenario, they focus on procuring unsecured capital from the lenders. The borrower gets the liberty to determine the utility of the capital as long as it is exhausted on business expenses.

Acute Need for Borrowing Higher Amount

SMEs requires loan amount in order to leverage it for multitudinous business purposes. For unsecured business loans, the loan amount is flexible. When secure financing is considered, the loan value is directly dependent on the value of the pledged asset. Unsecured business loans give the business owners and startup founders the flexibility to borrow higher amount. Depending on the lender and the type, with unsecured business loans, a business can borrow any amount between Rs.1 Lakh and 1 Crore.

When SME has an Excellent Credit Record

Unsecured business loan works best for established business borrowers with excellent credit history. For SME loan, banks and other financial institutions do not harbor towering expectations of the credit rating of the organization. An exemplary credit rating is essential to obtain an unsecured business loan. When you apply for an unsecured loan, your profile is assessed on 5 C’s namely collateral, capital, capacity, character, and conditions. The lender examines the records and then decide if you meet the eligibility criteria for a loan equivalent to a secured loan which comprises a collateral. An unsecured business loan aids in credit rating improvement since the time duration fixed for repayment is short and if you make the restitution in time, there are higher chances to procure funding from other financial institutions.

Each business is unique and unsecured loans serve as a financial gizmo that panders to a specific set of requirements for the SME. Small and medium-sized enterprises who are newbies in the world of trading prefer this type of loan since this type of loan phase out the requirement of offering a valuable asset as a guarantee for securing the loan. Dispersal of business loans in earlier days has been a tedious process. Even after meeting the eligibility criteria, disbursement of funds used to exhaust a lot of time which in turn used to thwart the business growth of SME. Post-2013, with the introduction of a powerful money lending platform like Captalfloat, sanctioning and dispensing funds had become facile. Unsecured business loans are now obtained without paying inordinate interest rates charged by a cluttered set of financiers. LendingKart has an extensive suite of products that mitigate the snag of repaying the hefty interest amount even when business operations are not running smoothly. Unsecured loans are cyclical and maintaining a healthy relationship with the financiers is always advisable. SMEs give preference to unsecured loans since they are gettable for every business affair. With Capital Float’s money-lending platform, the borrower can obtain the loan amount to finance day-to-day operations, handle utility payments and purchase raw materials. Nowadays, SMEs are refraining from approaching banks for urgent monetary needs. An organized money-lending marketplace like LendingKart is offering unsecured loans to the business owners and startup founders with contoured approval procedure and moderate interest charges.