Small businesses often find difficulty in the expansion because of lack of funds. Collateral free loan also called unsecured loans should be opted by business owners and here are 10 reasons why:
1. No Collateral Requirement
The borrower gets the necessary funds without backing the loan with collateral in unsecured loans. There is no need for ensuring the debt with assets like car, property etc. This gives flexibility to the business to establish good credit without any loss of collateral security in case the business defaults. Digital lenders like Indifi provide unsecured loans quickly and without the need for much processing and documentation.
2. Credit is a Reusable Resource
Unsecured loans can be structured as a credit card wherein the borrower is given a set limit, and till the time the balance is being paid, the credit can be used again if needed. However, the limits are smaller than the secured loans which consequently reduces the lender risk.
3. Loan is Open Ended
Unlike secured loans which come with a defined end date, business loans without collateral are open-ended and do not have a predetermined end date. There is no bounding of meeting certain approval guidelines, making agreed payments or avoid defaults. However, doing all these lets one use the funds when needed.
Many borrowers wrongly think that unsecured loans are free of default penalties. These business loans are collateral free but the lenders have the legal security to recoup their debt. In case of default by the borrower, the lenders can pursue legal action and put liens on your property till the debt amount is paid off.
4. Financing is Unrestricted
Lenders of business loans without collateral leave the spending responsibilities to the small business owners. You can use the money any which way you want until the money is being deployed for business expenses.
5. Helps with the Cash Flow
Unsecured business loans give you enough money which can be a very helpful aid for startup funding, an extension of present business operations or a new campaign. The unsecured loans help with the cash flow and thus should be used wisely and efficiently and on the growth of business only. The core idea behind is the generation of income which will go towards repayment of loans and leaving behind a decent amount for you to use otherwise. This way, you can achieve your business goals without spending the cash in hand.
6. Quicker Dispersal
Digital lenders like Indifi provide collateral-free loans with easy and quick documentation and processing. Quicker disbursal of loan ensures that the business has a fast solution to carry on with their business operations even during the financial crunch.
The unsecured business loans are processed quickly as the eligibility criteria are relaxed and there is no need of any collateral. Thus borrowers get the loan in short duration of time.
7. Shorter Deadlines
Unsecured business loans are meant to be repaid in a short duration of time, thereby making it easier for SMEs to plan their budgets. It also aids as the debt is repaid in a short period. These collateral free loans thus give extra flexibility to business owners and make access to capital much easier.
8. Added Protection
In case of bankruptcy, the court will discharge the unsecured loans. However, the court will not discharge the loan if the lender has obtained a judgement against you.
9. Focus on Flexibility
Business loans without collateral are flexible in nature as they allow you to choose the loan amount which you desire and for the time you need it. Some lenders also let you pay back early without penalty.
10. Added Revenue
Business loans without collateral are financed solutions which are directly proportional to the health of your business and the ability to repay. Unsecured loans come with several benefits including added revenue, business growth, easier access to funding and achievement of goals. This results in the enhancement of business significantly without putting any pressure on the business or risking your assets and property.