In earlier days, businesses did not have much option to resort to when it came to securing financing for the necessary capital infusion. They would thus either depend on ownership capital or go for personal financing to introduce liquidity to their ventures. It changed drastically with the introduction of unsecured business loans.
Today, businesspersons can avail these advances against minimum eligibility and document requirements for timely funding. However, as these are collateral-free advances and involve higher risk to the lender, financial institutions stress on fulfilling all unsecured business loan eligibility and document requirements for successful approval. It is thus essential that you have sufficient information regarding these requirements before applying. Let’s take a look.
Eligibility Criteria for Unsecured Business Loans
Eligibility requirements laid down for an unsecured business loan can vary from one financial institution to another. However, below are mentioned some standard requirements you would need to fulfil when applying for the loan.
- The borrower must meet a minimum and maximum age limit requirement.
- The business should be up and running for a minimum duration of say up to 1 to 3 years.
- The business must be involved in manufacturing, trading or services.
- Both individual and business credit score should not be less than 750.
- There should not be any repayment default on previous loans.
Some lenders also list down minimum annual revenue as a qualifying unsecured business loan eligibility criteria.
When applying for the loan, a businessperson should provide a detailed business plan including growth and expansion initiatives along with a well thought-out repayment strategy. It should help convince the lender better for favourable terms on the loan. A higher annual income with consistency only helps improve your business’s repayment capacity, making it eligible for competitive rates in the market.
Documents Required for Collateral-Free Business Loans
You should also support your loan application with the following essential documents that should establish your eligibility for the loan.
- A duly filled up application form, carrying all required personal, occupational and financial details of the applicant.
- Identity proof of the individual as well as business if it is a sole proprietorship. In case of partnership firms, all involved partners must submit their individual proofs of identity, while in the case of companies, identity documents of all involved directors in the company’s board should be submitted. The common proofs of identity include PAN card, Aadhaar card, Voter ID card, etc.
- Address proof of the business includes any government-issued document that established the residential address of the individual and company. For instance, it can include tax payment receipts, Aadhaar card, utility bills, etc.
- Proof of business existence, which can include business incorporation certificate, partnership deed, memorandum of association, GST certificate, etc.
- Bank account statements for the last 6 months.
- Income tax return filed for the last 2 years.
Further, professionals planning to avail a business loan for their practice also need to provide their qualification certificates and vintage certificates or documents that would establish that they have completed a set number of years in the practice.
The list of documents required for unsecured business loan processing is only indicative. Your selected lender may ask for any other document required as deemed fit by them to establish your eligibility for the advance.
Now, based on these unsecured business loan eligibility requirements, lender may provide the advances for various purposes to help cater to all funding needs. Some of them are –
- Improvement in the business’s cash flow
- Growth and expansion of the business
- Restocking inventory
- Meeting seasonal sale demand
- Plant and machinery upgradation
- Expenses of the premises
- Introduction of new products in the market
- Purchase of machinery
- Capacity expansion of the business
The list is expansive, and luckily so, unsecured business loans do not come with any limit or restriction to end-use. A businessperson can thus avail the advance for any financing need of the venture.
With the right unsecured business loan eligibility fulfilment, you can avail the necessary funding without any hassle. Reputed lenders provide financing of up to Rs.25 Lakh to help businesses meet their big-ticket financing needs with ease.