Reasons Why Unsecured Business Loans is Popular in India

Corporate Finance

Small businesses are the backbone of any economy. They create jobs, drive innovation, and contribute to the country’s overall growth. In India, small businesses have played a crucial role in the development of the economy. Despite this, many small businesses face difficulties in getting access to capital. This is where unsecured business loans come into play. 

These loans are becoming increasingly popular in India due to their easy eligibility criteria and low-interest rates. In this blog post, we will discuss the reasons why unsecured business loans have become so popular in India.

Let’s take a look at these reasons.

Helps in Overcoming Transient Business Disturbances

Unsecured business loans have become popular in India as they help businesses overcome transient disturbances. For example, if a small business faces a short-term cash crunch due to delayed customer payments, it can take an unsecured loan to tide over the situation. 

These loans are also useful for businesses that need working capital to take advantage of opportunities such as a sudden increase in demand for their products or services.

Quicker Loan Approval and Money Disbursement

One of the key reasons why unsecured business loans have become popular in India is that they are approved and disbursed much faster than secured business loans. This is because when applying for a secured loan, you must first pledge an asset as collateral which can slow down the entire process. 

However, with an unsecured loan, there is no need for collateral, making the approval and disbursement process quicker. Moreover, the capital loan interest rates are also lower than secured loans.

Flexible Repayment Options

One of the reasons why unsecured business loans have become popular in India is because of the flexible repayment options that they offer. Secured business loans usually have to be repaid within a fixed period, but you can choose how long you want to take to repay the loan with an unsecured loan. This gives you much more flexibility in managing your cash flow. 

With secured business loans, the interest rate is often fixed, which means that you could pay more than necessary if market rates increase. However, with an unsecured loan, the interest rate is variable, so you can take advantage of lower interest rates if they become available.

Easy Application

One of the primary reasons secured business loans have become popular in India is that they are very easy to apply for. You can usually apply online in just a few minutes, and you will often get a decision within 24 hours. This makes secured business loans ideal for businesses that need access to capital quickly. Another reason secured business loans have become popular in India is that they can be used for various purposes. 

For example, you can use a secured business loan to finance equipment purchases, expand your premises, or hire new staff. This flexibility means that secured business loans can be tailored to meet the specific needs of your business.

Business-Friendly Terms & Conditions

One of the primary reasons secured business loans have become popular in India is the fact that these come with business-friendly terms and conditions. For instance, a secured business loan can be availed for a tenure of up to 15 years, which gives businesses sufficient time to repay the loan without any financial strain. 

Moreover, secured business loans also offer competitive interest rates, making them an attractive financing option.

No Shared Ownership

The most common reason people go for unsecured business loans is that it doesn’t require any collateral. When you take a secured loan, the lender can ask for your business assets as collateral if you default on the loan. This is not the case with unsecured loans, making them a much safer option, especially for small businesses. Besides this, unsecured business loans are quick and easy to get. 

Unlike secured loans, which can take weeks or even months, unsecured business loans can be approved in just a few days. This makes them ideal for businesses that need cash fast. So if you’re looking for a business loan and don’t want to put up your assets as collateral, then an unsecured business loan is the way to go.

How to Get a Business Loan in India?

Here are the steps on how to get a business loan in India:

  • Research the different types of business loans available.
  • Find out which type of loan best suits your business needs.
  • Compare interest rates and terms from different lenders.
  • Apply for the loan with the lender of your choice.
  • Provide the required documents.
  • Wait for loan approval.
  • Use the loan amount to grow your business.

The Bottom Line

For small business owners in India, unsecured business loans have become a popular funding source. There are several reasons for this, including that secured loans often require collateral, which many small businesses do not have. In addition, unsecured loans tend to have lower interest rates than secured loans, making them more affordable for small businesses. 
Finally, unsecured loans can be easier to qualify for than secured loans, making them a good option for businesses that may not meet the criteria for a secured loan. We hope that you’ve understood how to apply for a small business loan.