Unsecured Loan
Unsecured Personal Loans are a type of loan where the borrower does not need to provide any collateral or security against the loan amount. Unsecured loans allow borrowers to use their assets, such as property, vehicles, or other valuables, as a guarantee for repayment.
What is Unsecured Business loan?
An unsecured business loan is a loan offered by banks and financial institutions based on the credit worthiness & repayment capacity of a borrower. No property collateral is taken as security for this loan .There are two basic criteria looked in to by a lender, while assessing unsecured business loan proposals
Benefits of Loan
- Repaying capacity of a borrower : Repayment capacity of a borrower is assessed with the help of Income tax returns, financial audit reports, GST returns, Bank statements, existing loan obligations and loan repayment statements. Accordingly, there are various products available to derive eligibility for unsecured business loan like Net Profit, Gross profit, Average bank balance, Sales Turnover margin, repayment track history, GST returns etc.
- Intention of a borrower to repay : This is another important criteria in assessment of unsecured business loan proposals. Borrowers having very good repayment capacity, may reflect poor Intention for repayment of loans, depending upon loan availed in the past.This may be due to borrower not giving due priority for loan repayment. The intention is checked with the help of credit score of a borrower, which reflects month wise repayments done by borrower for all loans availed in the past. So, even if borrower meets all credit criteria but does not have good intention, loan can not be sanctioned.
Eligibility Criteria
Apart from these 2 main criteria, other criteria required for availing unsecured business loans are
- Business Stability of minimum 3 yrs required. However, some lenders have flexibility in it and provide loan for business which is 1 year old also.
- Age of borrower : Age of main promoter of business requires to be less than 70 at the end of loan tenure. This criteria can also be diluted by taking legal heir of the promoter as coaplicant.