Access to unsecured or collateral-free loans has been a challenge for both lenders as well as applicants. But the emergence of Fintechs like Oxyzo Financial Services Pvt Ltd which have been continually striving towards financial inclusion of the underserved sector has made collateral-free loans accessible to many Small & Medium Enterprises (SMEs).
Collateral is the security that may come in diverse forms like real estate (commercial as well as residential properties), gold, vehicles, machinery, equipment, savings, raw materials, inventory and/or other valuables. However, startups and many running businesses may sometimes not have any collateral to offer as a security. In such a situation, an individual or a business can apply for a business loan without collateral.
Moreover, unsecured loans are helping the service industry flourish by helping them expand and grow. Unlike other businesses, such a sector lacks significant assets and hence may fail to stand for a secured loan. But with the help of an unsecured loan, this industry can make the most of its potential in times of funding requirements.
Here is a simple and small procedure to follow while applying for a collateral-free loan.
- Check for the lender’s eligibility criteria.
- Have your necessary documents ready.
- Apply online or offline for the loan.
- Get sanctioned.
- Get funds.
Eligibility criteria:
When you have researched to filter out where you are to apply for a loan, it’s mandatory to do a thorough check for their qualifying conditions. These may vary from lender to lender. And having acquainted yourself with the lender’s requirements will help you in preparing yourself for the same accordingly and act quickly.
Some of the common requirements by banks and Non-Banking Financial Sectors (NBFCs) for disbursing funds as business loans include:
- The applicant, if an individual must have attained the age of 18 years.
- The applicant, if an individual must be an Indian citizen with no criminal history.
- The existence of the business must be at least six months old.
- The Credit Information Bureau (India) Limited (CIBIL) score must be at least 700.
- Minimum yearly revenue.
- There must be no past loan failures of the applicant which shall also reflect in the applicant’s CIBIL score.
Documents required:
Here is a brief list of essential documents you must keep ready while applying for business loans. While some requirements may vary with lenders, most of the documents mentioned are usually commonly required.
- Duly completed loan application form.
- Business plan or formulated strategy to give the lender an insight into your revenues that can project how you plan to repay the loan.
- Passport-size photograph of the individual or the ownership holders or members of the board in case of a business firm.
- Proof of identification of the applicant(s).
- Know Your Customer (KYC) documentation like an Aadhar card.
- Business address proof.
- Business setup to validate as vintage evidence.
- Bank statement for the past 6 months or a year.
- Salary slips for the last 6 months.
- Previous business year’s income tax return, if filed.
Your lender may ask for additional document(s) if required.
Applying for the loan application:
It’s an easy process. Once you are eligible and have the necessary documents, you can fill in the application form either online or offline. Fill in all the relevant details carefully as directed on the form. Enclose the necessary documents as attachments. Check for the size of the files attached. If required, you can reduce their sizes using any online tool in just a couple of minutes.
Once all the relevant details have been filled in and the required documents are attached, you can submit your form for its evaluation.
Do not forget to check out for the mistakes to avoid while applying for a business loan.
Sanction:
The lender will check for the applicant’s form and the authenticity of the attached documents. This will help the lender to check the applicant’s creditworthiness. Loan processing has become very fast with Fintechs since they employ several data analytic tools. Your application processing may take less than a couple of working days. Once your loan application is checked thoroughly, the lender will propose a fair sanction. The entire amount you applied for may get sanctioned. On the other hand, it is also possible that a part of it is sanctioned as per what seems in the best interest of both the lender and the borrower.
Disbursement:
Once your loan application receives approval, you can receive the funds in another 2-3 days. So, the entire process may take less than a week. Finally, you’ll be able to make the best use of funds for expanding your business.
As per the terms and conditions agreed to, you shall try to repay the loan amount as agreed. This will help in increasing your creditworthiness and your reputation with the lender.
If you have any doubts, you can check out for help available at Oxyzo Financial Services Pvt. Ltd.
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