BUSINESS LOANS

Capital is the life-blood of any business. Banks and Non-Banking Finance Companies are there to provide you with the required financial assistance.
Unsecured business loans are the loans in which a borrower is not required to offer any personal or business assets as security for the loan. It is the most favored funding option for business owners, who do not have any collateral to offer for their loans. However, the promoters of the business should have a good credit history for availing unsecured business loans. The interest rates on unsecured business loans are relatively higher as there is no collateral/security to recover the loan in case of a default.

Unsecured loans are provided to entrepreneurs on the basis of their financial position of the business. A borrower’s creditworthiness is assessed based the ability to repay and intention to repay the loans. The ability to repay is assessed based on in the financial statements like Bank statement, balance sheet, Profit&Loss account and Income Tax Return(ITR).
The intention to repay is gauged from the credit history as per the credit report. A credit score of above 750 usually is acceptable to all lenders for granting an unsecured loan to businessmen.

The borrowers can be sole proprietorship firms, partnership firms as well as private limited companies. Not only self-employed individuals but self-employed professionals can also avail an unsecured business loan. Also known as business installment loans, the end-use of these loans can viz; working capital, equipment financing, business expansion, and business promotion.

Eligibility criteria for Unsecured Business Loans

Unsecured small business loans are provided on the basis of the criteria mentioned below:

  • The applicant must be 21 years of age.
  • The maximum age of applicant at the time of loan maturity should be 65 years.
  • The business should be at least 3 years old.
  • The business owner/firm should have a good credit score and sound profit history.

Documents Required for Securing Unsecured Business Loans

  • Identity proof of the applicant (Passport / Voter ID / Driving License / PAN Card)
  • Address proof of the applicant (Ration Card / Driving License / Voter ID / Registered Rent Agreement / Passport / Trade License / Sales Tax Certificate)
  • Date of birth proof (Driving License / PAN Card / Passport / Birth Certificate)
  • Bank statement of last 6 months
  • Proof of business continuation (Trade license / Establishment / Sales Tax certificate)
  • Latest income tax returns along with computation of income, balance sheets and profit and loss statements of last 2 years
  • Other mandatory documents (Sole Proprietorship Declaration / Certificate Copies of Partnership Deed / Memorandum of Agreement / Board Resolution)

Interest Rates

Bank Name Interest Rate Range (Fixed) Processing Fee Range(One time) Loan Amount Tenure Range
HDFC BANK 10.99% – 20.70% Up to 2.5% 25L Max 1-5 years
ICICI BANK 10.99% – 17.99% 2.25% (min. ₹1,499 + applicable tax) 20L Max 1-5 Years
KOTAK MAHINDRA BANK 12.99% – 14.50% 0.99% to 2% 45L Max 1-5 years
TATA CAPITAL 11.49% – 21.00% 0 20L Max 1-6 Years

FAQs

What are the salient features of an Unsecured Business Loan?

  • No security/collateral required
  • Flexible repayment terms
  • Attractive interest rates
  • Easy documentation, hassle free and fast processing

Who can avail an Unsecured Business Loan?

Business loans are meant for small businesses to meet their capital requirements. Broadly, the following categories of borrowers can avail an unsecured business loan

Self Employed Professionals (SEP)

This category includes

  • Allopathic Doctors
  • Chartered Accountants
  • Company Secretaries
  • Architects

The applicants should have proof of qualification and should be practicing their profession.

Self Employed Non-Professionals (SENP)
This category is popularly known as businessmen and it includes traders, manufacturers and service providers

Following are the entities which can avail a business loan-

  • Partnership firms
  • Limited Liability Partnerships
  • Private Limited Companies
  • Closely held Limited Companies

What are the loan tenure options available?

An Unsecured Business Loan can be availed for a tenure of 12 months to 72 months.

What are the minimum and maximum limits of an Unsecured Business Loan?

An Unsecured Business Loan in India can be availed in the range of Rs.50,000 to Rs. 75,00,000

What is the security required for availing of an Unsecured Business Loan?

No security or collateral is required to avail an Unsecured Business Loan.