How Can I Get a Small Business Loan Without Collateral?

As a small business owner, you wear many hats at once. From marketing to financing, you are in charge of all operations. For constant growth, you have to be on a constant lookout for expansion opportunities. The best way to go ahead with such business development is to take up a small business loan. With proper funds in hand, you can manage capital requirements for manufacturing, transportation, advertisements, customer service, etc., without having to exhaust your personal savings.

However, one major concern for small business owners is that they have to often give up a part of their business or resource as collateral while borrowing funds. According to the loan value, collateral can range from equipment to real estate. This can turn out to be a matter of insecurity, since this means that you can lose your valuable assets in the case of default in the loan repayment structure.

This article helps you out with this problem. Let us see how you can get a small business loan without collateral.

Collateral-Free Loans

The concept of a collateral arises when a lending institution gives an individual a loan but asks for a guarantee of repayment in exchange for it. Usually, collateral is considered a security and is given back once the entire loan amount has been paid back with interest. If the borrower is unable to make his/her financial ends meet and fails to repay the loan, the lending body has the right to auction off the collateral in the market for monetary compensation.

Yet, several lending firms now offer collateral-free business loans to make it easier for business owners to grow. This step will eventually lead to an increase in startups and employment opportunities in the country, thus bringing about economic growth.

Must Read: Top 6 Things You Should Know Before Refinancing a Business Loan

How to Apply for Collateral-Free Small Business Loans?

To apply for a business loan for your venture, follow these steps:

Step 1: Know All Available Options

There are numerous government-introduced startup loan schemes that you must know. Some of them are:

• Pradhan Mantri Micro Units Development & Refinancing Agency (MUDRA) Yojana that offers loans of up to INR 10 lakhs according to stage of growth, repayment capability, and type of business venture.
• Stand-Up India Scheme which is dedicated to supporting SC/ST and women entrepreneurs financially through composite loans of up to INR 1 crore.
• Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) which strengthens under-served and under-privileged business owners with loans of up to INR 2 crores.
• Coir Udyami Yojana (CUY) which equips coir-based businesses with loans of up to INR 10 lakhs.

Step 2: Check Your Eligibility

A business loan without collateral is sanctioned only to eligible applicants. There are several parameters against which the lending institution checks your eligibility:

• You must be an Indian national between 21 and 65 years of age.
• You must be self-employed as the owner, partner, or director of the board.
• Your CIBIL score must be at least 725.
• Your business must be in the manufacturing, trading or services sector.
• Your annual turnover must be a minimum of INR 10 lakhs.
• Your total work experience should be 5 years at least, with 3 years being in the same business.
• Your business must show proof of profitability for the past 2 years.

You can check your eligibility through SMFG India Credit’s online business loan eligibility calculator.

Step 3: Know All the Features and Conditions

The features of a small business loan as offered by an NBFC are typically as follows:

• Maximum loan limit is INR 75 Lakhs*.
• Loan tenure extends from 12 months to 60 months.
• Minimal interest rates

Step 4: Apply Online

You can apply for the small business loan, submit all required documents, and get the approval online. Moreover, you can get the funds transferred to your account shortly after approval, which means that you do not have to visit any branch to get your small business loan financing.

Conclusion

Small business loans without collateral are great financial options for business owners. If you are someone looking to take your business to the next level, you should consider SMFG India Credit’s loans. With its business loan options for budding entrepreneurs, you can achieve your business aspirations with no hiccups. Check out the documents required and calculate the monthly instalments to be paid through our online EMI calculator so that you can plan ahead.

To make the most of your business goals, a small business loan is the best step ahead. See your business reach new heights with supportive financial backing.