What is an Unsecured Business Loan?
An Unsecured Business Loan is a loan without any collateral/security that helps SMEs and startup companies raise debt for purposes such as expansion, project financing or equipment financing.
● √An Unsecured Business Loan does not require any collateral.
● Applicants looking to procure this type of small business funding should ideally have a high credit score.
● Generally, unsecured loans for businesses are taken in the form of a term loan repaid in EMIs.
● The maximum amount disbursed for an Unsecured Business Loan normally ranges between Rs. 15 lakh and Rs. 1 crore.
● Unsecured Business Loans for women
○ Banks offer an exclusive commercial loan scheme to empower women entrepreneurs in rural and urban India. This focused approach to commercial finance helps women entrepreneurs gain easier access to unsecured loans for businesses.
● Priority Sector Loans
○ Under RBI regulation, banks are required to dedicate a percentage of all business funding to the priority sector, which is mainly composed of rural businesses involved in agriculture.
○ Banks offer loans for specific inputs, technology and processes required in the agriculture business. For example, tractor loans are offered to farmers who require tractors for harvesting activities.
○ Unsecured small business loans for the priority sector generally has lower, more affordable interest rates.
● Quick turnaround time
● Helps businesses grow and expand
● Easy application and documentation
UNSECURED BUSINESS LOAN INTEREST RATES AND TENOR
● Unsecured Business Loan interest rates in India usually range anywhere from 18%-22%. There is a higher perceived risk by banks so rates for Unsecured Business Loans tend to be higher than that of other types of loans.
● An Unsecured Business Loan in India typically has a tenor of 1 to 3 years.
UNSECURED BUSINESS LOANS ELIGIBILITY CRITERIA
● To be eligible for Unsecured Business Loans, an applicant must be representing any of the entities below:
○ Sole proprietorships
○ Partnerships
○ Private Limited Companies
UNSECURED BUSINESS LOANS DOCUMENT CHECKLIST
| Document | Entity | ||
| Sole Proprietorship | Private Limited Company | Partnership | |
| Individual | Director | Partner | |
| INDIVIDUAL | |||
| Age & ID proof (any of the below):● PAN Card● Passport● Drivers License● Aadhar Card | √ | √ | √ |
| Residence/Office Ownership (any of the below):● Electricity Bill● Sales Deed copy | √ | √ | √ |
| Address Proof (any of the below):● Passport● LIC Premium (not over two months old)● Utility Bill (not over two months old)● Arms License (not over two months old)● Mobile Bill (not over two months old) | √ | √ | √ |
| Last 12 months Bank Statement | √ | √ | √ |
| IT returns for last 3 Years | √ | √ | √ |
| Photograph with Signature | √ | √ | √ |
| Any other loan statements on books of individuals/partners/directors along with sanction letters. | √ | √ | √ |
| COMPANY | |||
| Business continuity proof – 3 years income tax return & income statements | √ | √ | √ |
| Last 2-year audit report and audited Financials (debtors & creditors list a must) | √ | √ | √ |
| Last 12 months bank statements | √ | √ | √ |
| In the case of transfer of a loan: Last 12 months of loans statement along with the Sanction Letter of your previous bank | √ | √ | √ |
| Any other loan statements on books of companies along with Sanction Letters | √ | √ | √ |
| Last 12 months loan statement with Sanction Letter of any other existing loans | √ | √ | √ |
| Business incorporation date proof – PAN Card | √ | ||
| MOA(Memorandum of Association) and AOA (Articles of Association) | √ | ||
| Latest shareholding pattern on company letterhead | √ | ||
| List of current Directors on company letterhead. | √ | ||
| Certificate of Incorporation | √ | ||
| Partnership Deed | √ | ||
| Certificate of Registration | √ |
