Raising sufficient funds at the right time is one of the important parts of running a successful business. When you have an innovative idea for the expansion of your business, you must have the required amount to implement it. For this purpose, you can rely on a business loan, as these loans will provide adequate assistance for the purchase of equipment and appliances, meeting emergency needs, expanding the business, etc. Several lenders offer unsecured business loans to the self employed at attractive interest rates.
Features and Benefits of Unsecured Business Loan for Self Employed
Not guaranteed business loans for the self employed individuals offer numerous features and benefits. Let us check some of them here.
- No collateral needed: When you get an unsecured business loan, you don’t have to pledge any property or provide collateral to the lender. Such a business loan does not need any collateral to be sanctioned, which reduces financial stress.
- Minimum requirements: Unsecured business loans require minimal paperwork and documentation. This hassle-free process helps meet fund requirements and get approved immediately.
- Flexible loans: You can get a loan ranging from ₹10,000 to ₹50 Lakhs as an unsecured business loan depending on the type of business, its size and your needs. The term of the loan is flexible and starts from 1 to 5 years or more.
What are the different types of unsecured business loans for the self employed
There are different types of unsecured business loans that you can apply for if you are self-employed. Some of them are:
- Term loan: Unsecured business loans granted for a specific period at a particular fixed interest rate and repaid in EMI are called term loans.
- Loans under government programs: The Indian government offers several unsecured small business loans at comparatively lower interest rates. Some of them are Stand-up India Start-up Scheme, Mudra loan (PMMY), Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), Prime Minister Employment Generation Program (PMEGP), SIDBI’s Loans in 59 minutes, etc. .
- Working capital loan: Unsecured business loans that are approved based on the applicant’s creditworthiness and repayment capacity and which can be used to meet the day-to-day expenses of a business are called working capital loans.
- Micro-loans: Small loans ranging from ₹5,000 to ₹2 Lakhs offered by Micro Finance Institutions (MFIs) to meet the instant cash needs of the applicant are called micro loans.
- Business credit cards: The applicant who operates a business can take out unsecured business loans on their business credit card. The loan amount depends on the credit card limit sanctioned by the lender and may vary from person to person.
Who can apply for an unsecured business loan for the self-employed
Usually, lenders offer unsecured business loans to self-employed people who are professionals like doctors, engineers, chartered accountants, company secretaries, architects, etc. Non-professionals like traders, vendors, retailers, manufacturers, distributors and wholesalers can also apply for business loans.
What are the documents for an unsecured business loan for the self employed
Here is the list of documents you need to get unsecured business loans for self employed.
- Completed application form
- Identity Proof – Passport, Aadhaar Card, PAN Card, Voter ID Card, Driving License etc.
- Address Proof – Voter ID Card, Aadhaar Card, PAN Card, Ration Card, Utility Bills like Telephone Bill, Electricity Bill etc.
- Proof of income – ITR for the past two years and certified profit and loss statements
- Any other document required by the lender
- Two passport size photographs
How to Apply for an Unsecured Business Loan for the Self-Employed
Self-employed people can get a business loan without providing collateral. The amount of principal awarded will depend on the business you own and the relationship you have with the bank. The business loan interest rates will vary from lender to lender. However, it starts from 10.00% per annum and extends up to 24% per annum. You can take up to ₹50 Lakhs as an unsecured business loan for self employed. Here are the steps to follow.
Step 1: Visit the official website of the lender and check if you meet the eligibility criteria for the business loan.
2nd step: Click on the “Apply Now” option and open the application form.
Step 3: Enter basic personal and professional data.
Step 4: Verify your registered phone number by entering the OTP sent to your mobile number.
Step 5: Upload the necessary documents and submit the form.
Step 6: Once these documents are verified, an executive will contact you about the business loan application and help you through the process.
Majority of banking and financial institutions in India offer unsecured business loans to their eligible clients. Interest rates, maximum principal amount and eligibility criteria vary from lender to lender. Now you must have understood everything about getting an unsecured business loan from any lender.
This is a joint publication.