A common form of borrowing, collateral free loan is a loan that does not require the borrower to provide any security for the funds. This means you can get a business loan without hypothecating your asset with the lender. The loan is also known as unsecured loan and is a preferred form of borrowing for many small business owners. The loan can help small businesses in multiple ways as discussed below.
No hypothecation: First and foremost, a collateral free loan does not require any security. This makes it easier for small businesses to apply for the business loan. Even if you do not own any assets, you are eligible to apply for the business loan. There is no risk of losing your asset if you do not make the repayment on time. However, it is important to always pay the EMI without any default.
Maintain cash flow: You can apply for a loan for any purpose in the business. There are no restrictions on the end use. When you apply for a collateral free loan, you can maintain the cash flow in your business. It will not have an effect on the working capital because you will have funds to use for the business expansion. You no longer need to use emergency funds for the purpose of the business, the loan will help serve the purpose.
Quick disbursal: Since the loan has no hypothecation of an asset, the process of approval and disbursal is quick and convenient. There are no documents to be transferred under the name of the lender and there is no requirement of valuation of the property. This leads to a quick approval and an instant disbursal of funds. The entire process is quick and transparent, making it easier for you to get immediate access to funds.
Flexible repayment: The biggest advantage of the loan is flexible repayment. The business loan has high approval amount and you can repay the loan amount with interest over the tenure. The terms of flexible repayment make it easy and convenient for you to repay the loan without it becoming a burden on your finances. You can prepare a repayment schedule to ensure timely payment of dues.
Adds to the revenue: The loan amount will ultimately benefit the business. When you utilize the fund for the growth of your business, you will notice an increase in productivity, sales and revenue. Whether you use it for working capital needs or to purchase a new asset, it will have a positive impact on your balance sheet and will help your business expand.
There is a basic eligibility criteria to apply for a collateral free loan. It is a low risk loan that will help your business grow and expand. Considering the above mentioned benefits of the loan on your business, it is an ideal decision to apply for the loan. Whether you want to introduce a new product in the market or enter a new market, the loan will help you finance the same. As a small business owner, you have aspirations to take your business to new heights and the loan will help turn your goals into a reality.