Some common myths that revolve around unsecured business loans
Business financing seems to be a difficult and complex process, and what stands in the way are misconceptions. business loans, including unsecured business loans, are full of lies. We’ve compiled a list of some of the most common unsecured business loan myths to help you demystify them all and find the best financing choices.
Myth 1: Long approval time
Well, this is one of the most common myths about unsecured business loans. Since lenders do not require collateral, many people believe that the credit reporting process takes weeks. This rumor, however, is absolutely false. For credit scoring, financial institutions now rely on AI, ML and ACD models. Lenders use technology to assess credit risk, which makes the loan approval process extremely fast.
Myth 2: Getting approval is hard work
So, have you given up on applying for an unsecured business loan because you’re worried about not getting approved? If so, you should reevaluate your plan. You will be surprised to learn that despite the fact that the loan is unsecured, the lenders are not too strict about the eligibility requirements. To get instant approval for an unsecured business loan, make sure you meet the following eligibility criteria.
● Your business should make a decent profit every year.
● In your current company, you must have at least five years of experience.
● You operate a legitimate, non-seasonal business.
3d Myth: You have to provide collateralrl
It is amusing to discover that individuals still believe in this myth. When you see the term “unsecured” in front of a business loan, it means you can get a loan without providing collateral. You will need to provide collateral when applying for this loan if you do not meet the lender’s minimum eligibility standards or your credit score is not in excellent condition.
So the next time you apply for an unsecured business loan, take that notion out of your mind.
Myth 4: Interest on a business loan in India is extremely high
Like others, are you also afraid of this myth? If so, put your fear aside. High interest on a business loan in india is another common myth. In reality, the interest rate depends entirely on your profile, and it varies from one borrower to another. If you are in a profitable business, have extensive business experience, and have never defaulted on a loan, the lender will easily approve you for a low-interest unsecured business loan. Likewise, businesses with a bad credit history may be denied funds or given a loan with a high interest rate.
Myth 5: heavy documentation process
Many businesses abandon their idea of applying for an unsecured business loan because they assume their lenders will need a heavy set of paperwork. However, this is not true at all. When applying for this loan, the lending institution will ask you to submit some basic documents. These documents include a completed application form, KYC documents, proof of business existence, your business finances, and a few others.
Myth 6: Interest is the only deciding factor
So, if you are considering applying for an unsecured business loan with this factor in mind, let us ask you a simple question: what if you get a loan with a low interest rate, but the loan amount is insufficient to meet the basic needs of your business? Are you going to take a chance on such a deal? Surely not.
Unsecured business loans are designed to meet your short-term business needs. If you need Rs. 25 lakhs but the lender only gives Rs. 5 lakhs at a low interest rate, Rupees. Offers of 5 lakh will be of little value to you.
7th myth: the request for a small loan will be rejected
There is a common misconception about unsecured business loans that if you don’t want your application to be denied, you should apply for a large loan amount. However, the fact is that you can apply for this loan for a value ranging from Rs 5 lakhs to Rs 25 lakhs. In addition to this, business loans are tailored to meet specific business needs. For example, if you want to obtain a large sum to buy large machinery, you will need to apply for a business loan for the machinery. Likewise, there are various other options in the business finance segment.
Myth 8: Borrowers have no responsibility
No responsibility, seriously? Do you really believe that the lending institution will give you an unsecured business loan with the option of paying it back or not? If so, you are falling for one of the most common lies in the industry, which could hurt your credit score in the long run. In the event of default, the lender has the right to seize your property and take you to court.
We guess our efforts to debunk these myths have answered some of your questions about unsecured business loans. So don’t let these myths fool you; because they will prevent you from applying for one of the best business financing products.