Uncertainty is said to be the basic nature of the business. Availing a business loan in Lucknow, Jaipur, or any other city where the business is operating seems to be the best option to meet urgent business requirements. A small business considers availing a business loan during cash crunches or when it witnesses growth opportunities. Most lending institutions offer a collateral business loan, i.e., they require a collateral to back the business loan.
Collateral is usually is an asset which has a measurable financial value and can be hypothecated to secure a business loan. It can be machinery, real asset, vehicle, or even stocks. In case the borrower is unable to repay the business loan, the lending institution has the right to liquidate the collateral or have its permanent possession to recover outstanding business loan amount.
On the other hand, while availing a collateral-free business loan, the borrower is not required to pledge an asset as security. Often small businesses are not able to fulfill this criterion of pledging asset and therefore, face rejections. An unsecured business loan can be their savior in this sense. A business loan without collateral brings in new opportunities for small business owners and ensures that they have enough funds at easy terms to take their business ahead.
So, a loan for business without security is clearly the best option for growing small businesses. Now, let’s take a look at how a collateral-free business loan changes the small business strategies.
- Maintain Control: In the case of a cash crunch, most small business owners strategize to add a partner to the business. While including a partner would obviously bring in the finance, but you will have to give up on some percentage of control over the business. An unsecured business loan would bring the cash and at the same time, allow you to maintain full control over your small business.
- Avoid Conflicts: The second best way to meet urgent financial requirements is asking a friend or family member to help you meet your business’s financial needs. This again can be challenging as the lending friend or family member may inject themselves into your small business. They may try to make decisions with you since they have loaned you money. This can lead to conflicts and familial tension.
- Increase Inventory: In many cases, it is seen that small businesses are running profitably but doesn’t make enough profits to increase inventory for expansion. In these cases, a small business owner can strategize to avail a small business loan without security for increasing inventory. An unsecured working capital loan is said to the best for this purpose.
- Expansion: After successfully running your small business, perhaps you would want to expand or open an online store. Collateral-free loans for traders is the best option for this! A business loan would allow you to hire website and graphic designers who would aid you in the online expansion as well as marketing.
Many NBFCs these days are offering collateral-free business loan at competitive interest rates and easy terms and conditions. Mostly, NBFC business loans are designed to meet the requirements of the small business owners’ financial requirements. And now that you know how an unsecured business loan is beneficial for you and how it can help you change your business strategies, go ahead and avail one!