Some common myths surrounding unsecured business loans

Some common myths surrounding unsecured business loans

Corporate finance seems to be a challenging and complex process, and what gets in the way are misunderstandings. Especially business loans unsecured business loans, are full of untruths. We’ve compiled a list of some of the most common myths about unsecured business loans to help you debunk them all and find the best financing options.

1. Myth: Long approval time

Well, this is one of the most common myths about unsecured business loans. Because lenders don’t ask for collateral, many people believe that the credit check process takes weeks. However, this rumor is absolutely false. Financial institutions now rely on AI, ML and ACD models for credit assessment. Lenders use technology to assess credit risk, which makes the loan approval process extremely fast.

2. Myth: Getting approved is a difficult task

Have you given up on your intention to apply for an unsecured business loan because you are afraid you will not be approved? If so, you should reconsider your plan. You may be surprised to learn that despite the fact that the loan is unsecured, the lenders are not too strict about the qualification requirements. Make sure you meet the following eligibility requirements to get instant approval for an unsecured business loan.

● Your business must make a reasonable profit each year.
● You must have at least five years of experience in your current business.
● You operate a legitimate and non-seasonal business.

3d Myth: You must set up Collaterarl

It’s amusing to discover that people still believe this myth. If you see the term unsecured before a business loan, it means you can get a loan without posting any collateral. You are required to provide collateral when applying for this loan if you do not meet the lender’s minimum requirements or if your credit is not in excellent condition.

So the next time you ask for an unsecured business loan, get that thought out of your mind.

4. Myth: Interest rates for a business loan in India are extremely high

Are you, like others, afraid of this myth? If so, put your fear aside. High Interest on a business loan in India is another common myth. In reality, the interest rate depends entirely on your profile and varies from borrower to borrower. If you are in a profitable business, have extensive business experience and have never defaulted on a loan, the lender will easily approve you for a low-interest unsecured business loan. Similarly, companies with a bad credit history can be turned down for funds or get a loan with a high interest rate.

5. Myth: Difficult documentation process

Many companies drop the idea of ​​applying for an unsecured business loan, assuming their lenders will need a lot of paperwork. However, this is not true at all. When applying for this loan, the lending institution will ask you to submit some basic documents. These documents include a properly completed application form, KYC documents, proof of business existence, your company finances and more.

6. Myth: Interest is the only determining factor

So, if you are considering applying for an unsecured business loan with this factor in mind, let us ask you a simple question: What if you get a low-interest loan but the loan amount is not enough to meet your basic business needs? Will you risk such a deal? Certainly not.

Unsecured business loans are designed to meet your short-term business needs. If you need Rs. 25 lakhs but the lender only gives Rs 5 lakhs at a low interest rate, the Rs 5 lakh offers will be of little value to you.

7. Myth: Application for small loan amount is rejected

There is a common misconception about unsecured business loans that you should apply for a large amount of credit if you do not want your application to be rejected. However, the fact of the matter is that you can apply for this loan for a value between Rs 5 lakhs and Rs 25 lakhs. In addition, business loans are tailored to specific business needs. For example, if you want to get a large amount to buy large machinery, you need to apply for a machine shop loan. There are also various other options in the area of ​​corporate financing.

8. Myth: Borrowers are not liable

No liability, seriously? Do you really think that the lending institution will give you unsecured business loan with repayment option or not? If so, you’re falling for one of the most common untruths in the industry that could hurt your credit score in the long run. In case of late payment, the lender has the right to confiscate your property and take you to court.

bottom line

We trust that our efforts to debunk these myths have answered some of your questions about unsecured business loans. So don’t let these myths fool you; as they discourage you from applying for one of the best business finance products.

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