Unsecured Business Loan | How To Apply | Basic Guide

What is an Unsecured Business Loan?

An Unsecured Business Loan is a loan without any collateral/security that helps SMEs and startup companies raise debt for purposes such as expansion, project financing or equipment financing.

Features

  • An Unsecured Business Loan does not require any collateral.
  • Applicants looking to procure this type of small business funding should ideally have a high credit score.
  • Generally, unsecured loans for businesses are taken in the form of a term loan repaid in EMIs.
  • The maximum amount disbursed for an Unsecured Business Loan normally ranges between Rs. 15 lakh and Rs. 1 crore.
  • Unsecured Business Loans for women
    • Banks offer an exclusive commercial loan scheme to empower women entrepreneurs in rural and urban India. This focused approach to commercial finance helps women entrepreneurs gain easier access to unsecured loans for businesses.
  • Priority Sector Loans
    • Under RBI regulation, banks are required to dedicate a percentage of all business funding to the priority sector, which is mainly composed of rural businesses involved in agriculture.
    • Banks offer loans for specific inputs, technology and processes required in the agriculture business. For example, tractor loans are offered to farmers who require tractors for harvesting activities.
    • Unsecured small business loans for the priority sector generally has lower, more affordable interest rates.

Benefits

  • Quick turnaround time
  • Helps businesses grow and expand
  • Easy application and documentation

Unsecured Business Loan Interest Rates and Tenor

  • Unsecured Business Loan interest rates in India usually range anywhere from 18%-22%. There is a higher perceived risk by banks so rates for Unsecured Business Loans tend to be higher than that of other types of loans.
  • An Unsecured Business Loan in India typically has a tenor of 1 to 3 years.

Unsecured Business Loans Eligibility Criteria

  • To be eligible for Unsecured Business Loans, you will need to represent any of the entities below:
    • Sole proprietorships
    • Partnerships
    • Private Limited Companies

Unsecured Business Loans Document Checklist

DocumentEntity
Sole ProprietorshipPrivate Limited CompanyPartnership
IndividualDirectorPartner
INDIVIDUAL
Age & ID proof (any of the below):

  • PAN Card
  • Passport
  • Drivers License
  • Aadhar Card
Residence/Office Ownership (any of the below):

  • Electricity Bill
  • Sales Deed copy
Address Proof (any of the below):

  • Passport
  • LIC Premium (not over two months old)
  • Utility Bill (not over two months old)
  • Arms License (not over two months old)
  • Mobile Bill (not over two months old)
Last 12 months Bank Statement
IT returns for last 3 Years
Photograph with Signature
Any other loan statements on books of individuals/partners/directors along with sanction letters.
COMPANY
Business continuity proof – 3 years income tax return & income statements
Last 2-year audit report and audited Financials (debtors & creditors list a must)
Last 12 months bank statements
In the case of transfer of a loan: Last 12 months of  loans statement along with the Sanction Letter of your previous bank
Any other loan statements on books of companies along with Sanction Letters
Last 12 months loan statement with Sanction Letter of any other existing loans
Business incorporation date proof – PAN Card
MOA(Memorandum of Association) and AOA (Articles of Association)
Latest shareholding pattern on company letterhead
List of current Directors on company letterhead.
Certificate of Incorporation
Partnership Deed
Certificate of Registration