What is a loan?
In simple words, loan is an amount borrowed for a particular time and has to be paid back within a time frame along with surplus amount as an interest. This loan can be borrowed for our personal use, to buy a new property, for higher education of our kids or for the consistent flow in our business.
There are many financial instruments that can serve the need of that particular hour like personal loan, home loan, loan against property and many more. When we search across the market for the financial instruments we get to know one more product called Business Loan. For detailed information on loans please visit Mudrahome
When we start a business, we need funds for the smooth operations. Business loan is borrowed to maintain the consistency of the cash inflow and outflow. Business loan can help to buy new machinery, pay debts and maintain the circulation of money in the business. When a business has sufficient funds and the rotation is easier, our business also grows at a faster pace.
To be eligible to borrow is an important key to unlock the potential of the business and the business man. Though the eligibility criteria for a business loan is different with all Banks/ NBFC’s but few points are similar with almost all of them. You can apply online for different financial instruments and check your eligibility by filling few details at Mudrahome.
- Your business should be a growing business. This means that the turnover should be on an increasing scale every year.
- Businessman has to provide the audited financials for consecutive 3 years.
- Being eligible, a business loan of up to Rs 40Lakhs can easily be availed.
While calculating the eligibility of the borrower, Banks/ NBFC’s also provide you option of borrowing secured and unsecured loans. Borrowing through secured or unsecured way depends on your eligibility and the loan amount you need.
Secured Business Loan
Secured Business Loans are the loans that are backed up with collateral. This means that the borrower has to give a security of any asset (such as your home, personal property, shares etc.) which has value than the loan amount. The security gives an assurance to the Bank/ NBFC to lend you the money. Being backed with security, the loan is given on much lower interest rates as compared to unsecured loans. The borrower can easily negotiate on terms and conditions if the credit score, credit history and eligibility supports.
Unsecured Business Loan
Unsecured business loans are the loans that are not backed up with collateral. To avail this loan the borrower does not have to give any kind of security to the lender. Being not backed with any kind of security, the loan cost is higher. Even to avail an unsecured business loan the borrower must have good credit score and good credit history.
Why Unsecured Loan is an Excellent Idea?
You can borrow an unsecured loan by securing your reputation whereas the Bank/ NBFC can repossess your home in case of any default in secured loan. The application process is simpler and you don’t risk your property for smaller amounts. Unsecured Business Loan can also help to serve your other needs such as:
Business Expansion– It becomes easier to get funds for the expansion of business. You can easily apply for an unsecured loan online and it takes less than 48 working hours to get the funds in your account. For smaller amount, up to 5 Lakhs you can also apply for Selfie Cash – In House product of Mudra Homes, to fund your urgent need.
New Technology Adoption– Borrowing a short term unsecured loan can help you to adopt new technology by buying new machineries for the production or the improvement in the present product. For example, Mr. Ravi has a computer coaching center and wants to increase the number of computers in his center. Mr. Ravi is good at repaying his old credits and is worthy enough to avail an unsecured loan. He knows that with a new setup his center can acquire more number of students and he will be able to pay his EMI’s on time.
To Improve Credit Score– In any case if you had any defaults in your previous debts and it has created a huge dent in your credit score, a new unsecured loan can help to heal it. You can also make timely payments to your debtors, bank loans, OD’s, bills and other expenses. This in turn will improve your reputation and credit worthiness and you will be eligible to avail new loans in future. It is important to keep a track of your credit score so that by any chance if it needs any improvement, you can take preventive measures on time. Mudra Homes allows you to check your credit score for free at Mudrahome.
Reasons to Consider Unsecured Finance
The advantages that come along with unsecured loans are the main reasons to opt for the same. Such as:
- Faster processing
- Less documentation
- Highly flexible
You can obtain an unsecured loan online without going through any strict underwriting process and it helps to cover variety of expenses related to your business. Unsecured loans can be risky and you might have to settle for higher interest rates too. The bottom line is that instead of taking the gains into account you should also consider what you might stand to lose.
If you still have questions or doubts in your mind, the team of Mudra Homes is always there to assist you.