Unsecured business loans are loans which exist without collateral assets on the line. This is great for SMEs and start-ups because it gives them the required push. CapitalFloat, in particular, has unique benefits to offer.
Unsecured business loans are a great way to move forward in the business world. Below are a few common questions people have about these loans, and their answers.
What are unsecured business loans?
Unsecured business loans meaning is that money is lent to you without any collateral assets at stake.
Most loans work like this. Money is lent to a business, and they have to pay it back with interest within a stipulated time frame. Some asset (like a house) is kept as collateral. If the business defaults on these loans, the collateral asset is taken away by the lender.
But this is different. Unsecured business loan lenders give you money on the sole creditworthiness or reliability of the business which is asking for the money. These are also known as signature loans or personal loans.
What happens when you default an unsecured business loan?
The lender can sue the defaulter for the money owed (principal and interest) as well as additional penalties and costs as a punishment for defaulting on the loan.
What are the interest rates like on unsecured loans?
The unsecured business loan interest rates offered vary from bank to bank. However, some Non-Banking Finance Companies (NBFCs) also offer highly competitive interest rates.
An unsecured business loan interest rate comparison would show thatCapitalFloat offers attractive interest rates starting at 1.33{ed162fdde9fdc472551df9f31f04601345edf7e4eff6ea93114402690d8fa616} per month. Of course, this is a general figure. The amount of money lent varies depending on the type of loan.
What are the different types of unsecured business loans?
Loans, in general, are only usually distinguishable regarding purpose, interest rates, and length.
Specifically, we find that CapitalFloat offers three kinds of loans: term finance, invoice finance, and online seller finance.
How’s the Term Finance loan CapitalFloat offers?
The features are:
- You don’t have to give any prepayment charges.
- The tenure is flexible and ranges from 6 months to 3 years.
- The amount you want to borrow ranges from 1 lac to 50 lacs INR.
All these benefits are provided in exchange for really small unsecured business loan requirements like three years’ operational history, a 650+ CIBIL score, and an annual turnover of over one crore (or) impeccably audited financials.
It is important to note that other lenders often expect much more from you, especially regarding collateral.
What about the Online Seller loan?
This is most suitable for companies who are expanding their market sales or moving to new markets. Companies in transition to becoming something bigger.
- You can borrow for 90 to 180 days.
- The amount can range from INR 1 lac to 1 crore, depending on your needs. Also, it can be twice as high as the borrower’s monthly sales.
- The repayments have to be done fortnightly.
Aside from basic KYC expectations, all you have to show is one year of running a business, at least INR 25000 sales each quarter, and partnership vintage between 3-6 months at least.
Finally, what are invoice finance loans? Are they useful?
Invoice finance is loan that lenders like CapitalFloat give you on the basis of your invoice. That is, on the basis of how much money you expect to get from your customers.
The CapitalFloat invoice loans look as follows:
- You can borrow from 30 to 180 days.
- A maximum of 80{ed162fdde9fdc472551df9f31f04601345edf7e4eff6ea93114402690d8fa616} of the invoice value is lent, and this amount should be between 1 lac and one crore.
- You have the option of one-time bullet repayment.
Expectations from the borrower’s side are minimum two years of functioning business, vintage of over three months, and an annual turnover of over one crore.
Are unsecured business loans financially safe?
In short, yes. Especially, for small to medium businesses, unsecured loans can be helpful.
You have no collateral, fast funding, the flexibility of repayment (within reasonable limits), and high approval rates. Also in the unsecured business loan, bad credit isn’t that harmful because the lenders often believe in helping the business.
All of this is great for SMEs because it’s difficult to give valuable assets as collateral, and loans are crucial in expanding and improving business.
Further reading:
- https://www.nationalfunding.com/unsecured-business-loans/
- http://www.investopedia.com/terms/i/invoice-financing.asp
- http://www.investopedia.com/terms/t/termloan.asp
- http://smallbusiness.chron.com/happens-not-pay-business-loan-unsecured-1913.html
- https://www.unitedcapitalsource.com/blog/what-makes-unsecured-business-loans-safe-for-your-small-business
- https://www.kabbage.com/blog/unsecured-loans-what-to-watch-out-for/
- http://www.greenpath.com/resources-tools/financial-library/loan-types/secured-vs-unsecured-loans
- https://www.fundera.com/business-loans/guides/unsecured-business-loans
- https://www.linkedin.com/pulse/what-makes-unsecured-business-loans-safe-your-small-jared-weitz
- http://www.investopedia.com/terms/u/unsecuredloan.asp
- http://www.financefitnesscoaching.com.au/business-loans.html
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