4 Benefits Of Availing A Collateral-Free Business Loan

Are you looking for a simple way to borrow money for your business? A business loan is one of your top options, but it often comes with various conditions. Some lenders require you to submit a long list of documents and make you go through a long process before they approve the loan application.

Fortunately, some lenders don’t ask for collateral, which means that you’re not obliged to secure the loan with assets such as real estate and cars. With a collateral-free loan, you can easily fund your office renovation project, marketing campaigns, tech investments, and working capital.

If you’re wondering if a small business loan without collateral is the right choice for your company, here are some of its benefits:

   1. No Need For Security

If you’re concerned about giving up your assets in case your monthly payments are delayed or if you default on the loan, a collateral-free loan offers a significant advantage. Learn more about cross-collateralization to understand how it may impact your assets in case of delayed monthly payments or loan default, offering insights into the advantages of collateral-free loans. This type of loan won’t require you to put up your assets as collateral. As this is considered an unsecured loan, you don’t have to be worried about your possessions being attached to your loan and possibly losing them in case of payment default or delay.

Collateral-free lenders place a higher priority on your business’s market opportunity rather than placing pressure on you to put up security. They may also take into account your business plan and outlook to determine whether or not they’ll approve the application. For the most part, however, collateral-free lenders only need to make sure that you’re a legitimate business when determining your eligibility for the loan.

However, it’s also important to note that some collateral-free lenders will still require some form of guarantee on the side of the business owner. The lender may ask you to sign a personal guarantee that you, as an individual, will repay the loan you’ve taken for your business.

   2. Fewer Documents

Lenders will require borrowers to submit certain documents as part of their application requirements. This can be cumbersome and time-consuming for many small business owners. Although lenders who offer collateral-free loans will still require some documentation from their borrowers, the process is a lot more transparent and simpler.

Because you don’t have to worry about the title, registration, and tax documents for the asset you’ll put up as collateral for your loan, it’ll be easier for you to compile and submit all the required documents. Most collateral-free lenders will only require your business registration documents, financial and cash flow statements for the current and previous years, income tax returns, and some know-your-customer (KYC) documentation.

   3. Quick Approval

There may be times when you’ll need funds for your business right away, such as the following,

• there are unexpected tax or regulatory changes that affect your monetary obligations to the government
• you need to purchase essential equipment or technology for the office
• you’re launching a new marketing campaign that’s going to require a bigger budget
• you’re planning to make a new investment
• you need to pay for other obligations such as your suppliers’ outstanding invoices. You need to pay salaries.  Finally, any existing debt to other creditors

When you encounter these emergencies, a collateral-free loan would be the most advantageous option for you. This is because it’s often more accessible than a traditional business loan.

The loan application process would often take no more than 10 minutes to complete. Many collateral-free lenders will send you the funds right away. You just need to get your application approved. The funds may even hit your bank account less than 24 hours after you receive the notification of approval.

   4. Helps Establish A Positive Credit History

When you acquire collateral-free loans and make timely repayments, it can boost your credit history positively. Increased credit score and good credit history will enable you to position yourself as a reliable borrower. You’ll be in a better position to obtain a larger loan in the future when you need an immediate source of funds for your business.

Conclusion

If your business is experiencing a financial problem or if you just need funds to grow and expand, consider getting a collateral-free loan. A collateral-free loan is also the ideal option if you don’t own sizable assets or properties or if just you don’t want to risk losing them in case of repayment delays or loan default.

Moreover, a collateral-free loan is easily accessible online and the approval process is also faster. A collateral-free loan can also help you obtain larger loans in the future. As long as you repay the loan on time, you can improve your credit score and eligibility for bigger loans.