When you first try to establish your business the first thing you look for is money. Money is an essential component of any business. How are you going to finance the idea which you have in your mind is the main question. When you read the biography of any big businessmen they all tell how they gather up finances. Some sold their land some borrowed money from relatives some put their house on stake to get some finances luckily nowadays unsecured business loans facility is available for people who want to venture in business.
What is an Unsecured Business Loan?
Let’s take a brief look at what an unsecured business loan is all about. In secured business loan when you go to a bank or any other loan provider you have to put your tangible asset on stake (as a guarantee) to get the loan but in unsecured business loan, you don’t have to put your asset (which is commonly known as collateral) as a guarantee instead of the bank see your credit history and provide you a loan on the credibility that you have given them written promise that you will return this money.
An unsecured business loan is the entrepreneur’s heaven to start a new venture without seizing his asset.
How many types of unsecured business loans?
We are dividing them into two main categories
- One type of unsecured loan is made you repay and withdraw continuously.
- The second is fixed terms of payment lender has to make small payments until it reaches the whole amount.
Why it’s Called Unsecured?
It’s called unsecured because one party is lending money but another party is not putting collateral on stake. In secured business loans if the lender failed to repay you can seize his asset but this is not the case with an unsecured business loan.
What information is required by a bank or a Venture Capitalist for Providing an Unsecured Business Loan?
1. History of Your Transactions:
The first and foremost information that banks ask is about your track records of three months how much cash you withdraw and how much you have reimbursed in the bank.
2. Business Partners:
The second most important information required by the bank is who was your business partners in the past and how was your dealing with them and who are your current and future partners and their record of business and stakeholders.
3. Your Lending History:
Yes, you heard me right your lending history, who you had lent money in the past, their contact details and did you return the money, and at what time?
4. Tax Details:
How much tax you have paid annually as an individual and how much you have paid as a business entity.
5. Credit Score:
Your credit history is very important, to lend you money, banks will also want to know your credit scores and details about your credit card history
6. Profit and Loss:
Another important thing lender wants to know is how well is your business running. Is it making a profit or running at a loss? As it plays a vital part to know about the borrower of the money, although they have some knowledge about your money details. All this information is required by the bank to process your application on the unsecured business loan.
Pros of an unsecured business loan:
1.Less Time Required to Proceed:
As we all say that time is money, you need money on an urgent basis, the unsecured loans are provided on an urgent basis which will eventually work for you.
2. Flexible period (payback):
It is also a great advantage for you, to pay back your loan according to your flexibility. The purpose of an unsecured loan is to provide you money on an urgent basis and also pay back the amount according to your flexibility of time.
3. Flexible amount:
It is very important to pay back the amount of loan in a lease form, like you may have the option to pay back the amount on a monthly lease basis.
4. Good for young entrepreneurs:
As they are fast loan providers and have the different options available for the convenience of the borrower it is beneficial for the entrepreneurs, as it will not only help them to start the business but also it will help them to grow their business.
5. No risk to a personal asset:
As business is all about profit and loss, the unsecured loans are providing benefit to the young energetic individual to provide the business opportunity with the option of no personal guarantee needed, which means that if the company faces any losses in future, the owner of the business will not be personally responsible for the loss.
Cons of an Unsecured Business Loan
- High Markup
Everything comes with advantages as well as some disadvantages. As the unsecured loans will help the borrower to pay back the money in lease form, but it has a higher amount of mark up as compared to other loans available on an online basis.
- Increase in the Overall Borrowing Cost
By providing the loans on a lease basis, it will increase the overall cost for the creditors, also, it will not help the borrower to save the interest cost which is the main consequence in an unsecured loan.
Several loan companies are providing loans and giving help to the entrepreneurs but they also are helping the different businesses in different ways, to establish and grow.
To get loan from a genuine money lenders are most essential thing which a person need to look up for, also, after getting a loan the borrower must need to work hard to repay it, as it is the responsibility of the borrower to work and return the money and also to establish the business in a greater way.
Also, search for the money lenders that are providing the services according to your own need and according to your own choice of paying back money policy which is feasible for you.
Research, before you get into the loan process, as getting a loan according to your needs, is difficult. Try to clear your mind and focus. Moreover, try to discuss your business plan with the other successful entrepreneur so that you may also get tips for your business venture.
For entrepreneurs, try to work on innovative ideas that will lead your business venture towards a successful journey, although it will require a great effort from business owners as well as with the other partners but will eventually work. Lookup for the opportunities and avail them on time so that you can grow your business.