Personal loans have been the primary source of finance for businesses over the years. With time there has been considerable development. And today, multiple options are available for companies looking for funding.
Unsecured business loans have grown as a popular choice for businesses due to the multiple advantages. With the rise in a start-up culture and several small and mid-size businesses, the need for more convenient lending methods has emerged.
The Pros of Taking Out an Unsecured Business Loan
There are several reasons which make non-conventional lending options thrive over traditional methods. As such, here are the pros of taking out an unsecured business loan for your establishment:
1. No Need for Collateral
One of the critical features of the traditional lending model is collateral. Unconventional lending models do not have this requirement, as they provide loans to businesses without collateral.
This is especially beneficial to start-ups and entrepreneurs, as they are in the early stages of their business and usually do not have any assets to provide as collateral. Hence, having access to unsecured business loans is much more economical for them.
2. Simplified Application Process
The new lending models have upgraded the application process by taking it online. Borrowers can now apply via websites from the comfort of their homes. Meanwhile, the websites have a well-designed interface which makes them very user friendly.
The websites provide customers with step-by-step guidance, which helps them submit their loan requests efficiently. The customers can also choose from a range of loan options that the lenders usually display on their websites. As such, businesses and entrepreneurs have a range of options to choose from based on their needs.
3. Minimal Documentation
The process of borrowing from unconventional requires little to no paperwork. Users are required to submit soft copies of their identity proofs. In addition to this, they must submit documents related to the business.
4. Reduced Waiting Time for Amount Disbursal
Since applications are filed online, it is easier to process the loans swiftly. If all the eligibility criteria are met, the loan is sanctioned instantly. And this leads to quick disbursal of loan amounts.
5. Short Tenure and Flexible Options for Repayment
Most unconventional lenders provide loans over short-term periods. And the repayment tenure extends from 12 to 60 months typically. This provides businesses with various options when it comes to repayment.
Today, most lenders provide borrowers with more flexible repayment options to attract customers. It enables customers to repay their loans much more efficiently and effectively.
6. Absence of Shared Ownership
Many businesses rely on venture capitalists or investors to fund their business. Most of these investors tend to demand a share in the company’s profits in exchange for funds. This lands the owners in a tricky spot, leading to them losing ownership of their business.
Approaching investors and venture capitalists requires massive planning and preparation. They need a full-proof plan. In contrast, coming to a financial company is a much easier process. And the chances of getting a loan approved at the first go are higher with the latter.
There are quite a few factors to consider while choosing a lender. It is advisable to do proper research on the interest rates, tenure of repayment, and other documentation processes involved before selecting the option that suits you best. Meanwhile, unconventional lending options are here to stay and will grow with the expansion of entrepreneurial possibilities in the economy. And businesses and individuals will benefit from this model of lending to a great extent.