Common Myths Surrounding Unsecured Business Loans
Misconceptions abound in unsecured business loans, making it appear to be a difficult and complex process. Myths are very commonly prevalent in business loans, particularly unsecured business loans. We’ve compiled a list of some of the most common myths regarding unsecured business loans to help you dispel them all and find the best financing options.
Myth #1 – Long Approval Time
Many people believe that the credit appraisal procedure takes weeks. The truth is, the credit appraisal procedure can be completed in just one or two business days. If you’re willing to give your paperwork for a small loan, you will receive your cash money in a matter of hours. Most unsecured business loans in India are approved on the same day itself.
Myth #2 – Need For Considerable Business Age
The common myth is that business needs to have been around for 5-6 years before the loan is approved. Not true, banks have an excellent track record for working with new businesses. You don’t need a long business vintage to get an unsecured business loan. Businesses as young as 2 years old can also get an unsecured business loan.
Myth #3 – You Need To Offer Heavy Collateral
Actually, you don’t. Many banks offer unsecured business loans from as little as Rs. 1,00,000 to as much as Rs. 30,00,000. Unlike secured loans, you are not required to offer valuable collateral. You can use them to finance any business or project.
Myth #4 – Loans Are Available Only To Popular Businesses
Business loans are only given to companies that own big names in the market. The truth is, there are many businesses with a proven track record that do not own a large market share.
Myth #5 – Interest Rate Is Very High On Unsecured Business Loans
Interest rate on unsecured business loans is generally lower than credit cards. The interest rate of unsecured business loans in India ranges between 12.50%-22.50%. Unsecured business loans offer one of the best interest rates for business loans. They offer business owners an alternative to traditional banking.
Myth #6 – Too Much Documentation
There’s no need for excessive documentation on unsecured business loans. All the documentation that is required is an account statement for the last 6 months, a current 10-year tax return and bank statement.
Myth #7 – Loans For Small Amount Will Be Rejected
Business loans are the easiest form of credit to receive. You can apply for unsecured business loans as little as Rs. 1,00,000. Furthermore, business loans are tailored to individual business requirements. For example, if you require a substantial sum of money to buy huge machinery, you should apply for a machinery business loan. Similarly, in the company finance market, there are a variety of alternative options.
Myth #8 – Borrowers Don’t Own Any Liability
This is far from the truth. Your business and its assets can be confiscated by the lender if you don’t repay the loan amount. This also has an effect on your credit score. It is important to make repayments on time to protect your credit score and credibility. Only then you can avail further credits and loans. If you are suffering from a low credit score, here are some simple steps to improve your credit score quickly.
Myth #9 – Unsecured Business Loans Are Not Available For Start-Ups
Start-ups can very much get unsecured business loans based on their sales projections and a solid business action plan. The bank will take into consideration the amount of sales, the amount of funds currently going into the business and the amount of funds the business has in reserve. Here are a few other financing options available for Start-ups.
Unsecured business loans are an excellent source of credit for small businesses. They are the ideal form of financing for start-ups and small businesses. Go through the list of unsecured business loans available in the market and apply for those that suit your needs.