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One of the biggest obstacles any small business or start-up may experience is acquiring funding. Traditional loans are often secured loans requiring collateral; thus, this may not be a viable financing option for businesses that do not have adequate assets to pledge. Luckily, business loans without a guarantee, also called unsecured business loans, provide a solution for such enterprises.

This comprehensive guide explores everything about business loans without collateral.

What is a business loan without collateral?

A business loan without collateral is a type of business loan that doesn’t require the borrower to provide security like property, equipment, or inventory to obtain it. It is generally called an unsecured business loan. Instead of relying on collateral, lenders evaluate the following aspects of the borrower:

1. Credit score
2. Financial performance of their business
3. Ability to repay the loan

Unsecured business loans are particularly beneficial for small enterprises or startups that don’t have a huge asset base but have great growth potential and a solid financial plan.

Types of business loans without collateral

Several types of unsecured business loans cater to different needs. Let’s explore the most popular options:

Business credit cards

This is ideal for managing smaller, day-to-day expenses. Business credit cards offer revolving credit, which can be repaid and reused as needed.

Line of Credit

This flexible loan option allows you to get funds up to a predetermined credit limit, and  you only pay interest on the amount you borrow, not the entire credit limit. It is especially beneficial for businesses with fluctuating cash flows.

Term loans

These provide a lump sum amount, which can be repaid in fixed installments over a set period. Term loans are suitable for larger investments or projects.

Invoice financing

It helps businesses unlock cash tied up in unpaid invoices. Lenders provide an advance against your accounts receivable, ensuring steady cash flow.

Merchant cash advances

This option offers a lump sum in funding for businesses with high daily transactions. The loan amount can be repaid through a percentage of daily sales.

Why should you pick an unsecured business loan?

Unsecured business loans offer several benefits that make them an attractive choice for entrepreneurs:

Protect your assets

With no collateral required, there’s no risk of losing personal or business assets, even in the event of default.

Quick and easy application

The absence of a collateral evaluation step leads to faster approval, making unsecured loans ideal for urgent financial needs.

Flexible usage

These loans can be used for various business-related purposes, including hiring staff, expanding operations, or purchasing inventory.

Builds creditworthiness

Timely repayments can enhance your credit score, improving your chances of securing larger loans in the future.

Key factors lenders consider for approving unsecured loans

When applying for a business loan without collateral, lenders assess several factors to determine your eligibility:

Credit score

A strong personal and business credit score is essential. It reflects your repayment history and financial discipline.

Business revenue

Consistent cash flow and stable revenue streams assure lenders of your ability to repay the loan.

Time in business

Startups may find it challenging to secure unsecured loans as lenders prefer businesses with an established track record.

Business plan

A detailed business plan outlining your objectives, financial projections, and repayment strategy can strengthen your application.

Debt-to-income ratio

Lenders review your existing debt to ensure you can manage additional loan repayments.

Steps to secure the ideal unsecured business loan

Here are some essential things you must do to find the right unsecured business loan for your business:

Step 1: Assess your financial needs

Determine how much funding you require and what it will be used for. Having a clear purpose can help you choose the right loan product.

Step 2: Research lenders

Compare offerings from different banks, online lenders, and alternative financing platforms. Evaluate factors such as interest rates, repayment terms, and fees.

Step 3: Improve your creditworthiness

Pay off existing debts to reduce your debt-to-income ratio. Address errors on your credit report to improve your score. Also, build a solid business credit profile by paying suppliers on time and maintaining good financial records.

Step 4: Prepare documentation

Gather essential documents such as financial statements (income statement, balance sheet, and cash flow statement), tax returns, business licences, bank statements, and a detailed business plan.

Step 5: Apply for the loan

Submit your application to the chosen lender, ensuring all required documents are accurate and complete.

Step 6: Evaluate loan offers

Don’t just focus on interest rates. Consider factors like repayment flexibility, prepayment penalties, and customer support.

Tips to increase loan approval chances

You can enhance your business loan approval chances by the following methods:

• Build strong relationships with lenders. This can increase their trust in your business.
• Highlight your business’s growth potential and profitability through detailed projections.
• Seek expert guidance by consulting financial advisors or funding specialists to strengthen your loan application.

Conclusion

Securing a business loan without collateral is possible and practical for enterprises looking to gain funding to grow without risking assets. 

At TallyCapital, we identify that every business is unique, with its own set of challenges and opportunities. Thus, we are committed to providing you with modified business loans that cater to your specific needs. Our objective is to help you achieve your business goals, not to burden you with complicated loan structures.

For a businessman, getting the right loan is equally important as employing the right development strategy for the growth and sustainability of the business. If you’re in the midst of growing your company, investing in new equipment, or managing cash flow, a good type of financing can offer you the strength you need to win. Numerous forms of business loans are available; nonetheless, it is important to comprehend the different types and select the one that best fits your company’s requirements.

This blog will discuss the various loan options available to business owners, such as unsecured, MSME, and other business loans specifically designed for micro, small, and medium enterprises. Furthermore, we’ll focus on the criteria for obtaining these loans and all the features concerning them for better decision-making.

Types of loans for businessmen

Finding the right type of loan to finance your business is very important. Below are the most commonly used loans by entrepreneurs:

Unsecured business loans

Entrepreneurs who don’t have assets to offer as security greatly prefer unsecured business loans. These loans are typically easier to apply for and faster to process since they don’t require you to pledge your business or personal property as collateral. The funds can be utilised to finance working capital requirements, business expansion, or technology upgrades.

Eligibility: 

Eligibility criteria for unsecured loans may vary by lender but typically include:

• Credit score: A solid credit score (generally above 650) is required, as this demonstrates the borrower’s ability to repay the loan.
• Business history: Lenders often prefer businesses operating for at least 1–3 years with a track record of revenue generation.
• Revenue: The business should demonstrate strong financial performance with consistent revenue.
• Repayment capacity: Lenders will evaluate the business’s repayment ability based on cash flow and profitability. 

MSME business loans

MSMEs are considered key players in developing many economies in the world. For medium and small scale business owners, MSME business loan offers a great financing solution. These loans typically offer more competitive interest rates than unsecured loans and a flexible reimbursement mode.

MSME loans can often be used for a larger range of financing needs, from equipment purchases to covering working capital.

Eligibility:

• The business must qualify as an MSME per government definitions, which usually depend on factors like annual turnover and the number of employees.
• A strong credit profile and a proven track record of revenue are important for approval.
• The loan amount and repayment terms are often determined based on the size of the business and the purpose of the loan.

Business loans for small businesses

Small businesses often need financing to carry out their operations smoothly, expand their reach, and acquire equipment.  Many lenders offer loans tailored for small enterprises. Business loans for small businesses often have simplified application processes and quicker approval timelines. They also offer flexible repayment terms, which can be adjusted according to your company’s cash flow.

Eligibility:

Eligibility depends on factors like:

• Revenue: Lenders typically demand a minimum annual revenue to ensure the business has the financial stability to repay the loan.
• Business history: A stable business history (usually 1–3 years) is important to demonstrate that the business is capable of generating revenue.
• Credit score: A strong credit score is essential, as it shows lenders that the business is financially responsible.

How to choose the right loan for your business?

The key to choosing the right business loan depends on your unique financial needs, business model, and growth objectives. Here are some steps to help you navigate the process:

Evaluate your business needs

Before applying for any loan, evaluate what your business truly needs. Are you seeking funds to expand into a new market, purchase equipment, or manage day-to-day operations? The type of loan you need will depend on how you intend to use the funds. If you need quick working capital, an unsecured loan might be a good option. If you’re looking to expand your operations or invest in long-term projects, an MSME or small business loan might be more appropriate.

Check your eligibility

Each type of loan comes with specific eligibility criteria. Assess your business’s financial history, credit score, and annual revenue to ensure you meet the basic requirements. Lenders will also consider your industry and business’ age when determining eligibility.

Compare interest rates and repayment terms

The total cost of the loan depends greatly on interest rates. Look out for different lenders and compare the interest rates they offer. 

Consult a financial advisor

If you’re unsure about the best loan option for your business, it’s advisable to consult a financial advisor. The professional can help you analyse your options, assess your eligibility, and provide guidance on securing the most favourable loan terms.

Conclusion: How can TallyCapital help you secure the right business loan?

When it comes to securing business financing, TallyCapital is a trusted partner in guiding entrepreneurs through the loan application process. As a leading platform offering insightful financial solutions, we ensure you have access to the most relevant information and options to make informed decisions.

At TallyCapital, we understand the unique needs of MSMEs and entrepreneurs looking for unsecured business loans. With our expertise in financial planning and loan sourcing, we help businesses streamline their loan application process, making it easier to access the funds they need for growth and expansion.

Growing your business is always an exciting milestone. It signifies success and the ambition to achieve more. However, growth usually requires additional capital. If applying for a business loan is on your to-do list, then you are in good company. Many small and medium enterprise (SME) businesses in India rely on loans to fuel their business. 

This blog simplifies the process of applying for a business loan in India, making it less daunting as you attempt to grow your business.

Why take a business loan to finance an expansion?

Business expansion typically involves increasing production capacity, setting up additional branches, investing in advanced technology, or entering new markets. However, these initiatives require a lot of capital. Business loans are often the best option for funding expansions for the following reasons: 

Access to capital: Expansion loans provide immediate funds without depleting your cash reserves.

Hassle-free repayment options: Loans terms can be tailored to your business needs so that repayments are hassle-free and manageable.

No dilution of ownership: Loans do not require giving away of control or ownership unlike equity funding.

Available business loans in India

It is important to know the types of available business loans before starting the application process. Here are the main types: 

Term loans: Ideal for purchasing machinery or establishing new infrastructure.

Working capital loans: Help run day-to-day activities during the expansion process.

Equipment financing: Covers the cost of acquiring machinery, technology or other forms of tools for the business.

MSME loans: Designed mostly for micro, small and medium-sized enterprises in India.

Overdraft facilities: Flexible loans allow you to withdraw amounts exceeding your account balance.

How to apply for a business loan?

Applying for small business loans in India can be a tedious process. This step-by-step guide simplifies the procedure.

Evaluate what you need

• Establish your expansion objectives and also the amount that is necessary.
• Be clear about the type of loan you need and its relevant features.

Prepare the necessary documentation

• KYC documents: Proof of identity proof and address proof
• Business proof: Submit documents like business registration certificates, trade licence, etc.
• Financial documents: Include invoices, tax returns, bank statements, and profit and loss statements.
• Collateral details: For secured loans, provide asset-related documents.

Check eligibility criteria

• Lenders want your business to be operational for at least three years.
• It is important to have a fair credit score (ranges at 700+).
• You must ensure that constant revenues and profits are prevalent in the accounts.

Explore the different lenders

• Compare interest rates, loan tenure and so on.
• Consider traditional banking, NBFCs as well as digital lenders.

Application submission

• Submit applications online or offline.
• Attach necessary documents.
• Wait for approval (may take days to weeks).

Eligibility criteria for business loans in India

Most lenders in India evaluate applicants based on these criteria:

• Business age: Minimum three years.
• Turnover: Affidavit of continuing business operation and annual audited financial statements.
• Profitability: Prove your ability to repay the loan.
• Credit score: A score of 700 or higher is generally accepted.
• Collateral: Secured loans may require assets as collateral.

How to increase your chances of approval?

Meeting the basic criteria is important. These basic steps can boost your approval chances: 

• Build a good credit history: Pay bills on time and maintain low credit utilisation.
• Maintain organised financial documentation: Comprehensive and current financial records inspire lender’s confidence.
• Choose an appropriate loan product: Match the loan type to your business needs.
• Clearly define loan purpose: Explain how the loan will be utilised and the expected returns.
• Compare multiple lenders: Find the best terms by comparing different offers.

Common problems and possible solutions in applying for a business loan

Entrepreneurs often face problems when applying for business loans. Here’s how to address them: 

• Poor credit history: Pay off existing debts and stay consistent with payments to improve your credit score.
• Inadequate paperwork:  Create a checklist and ensure all documents are ready.
• Inadequate collateral: Explore unsecured loans or alternative collateral options.
• High interest rates: Research better offers or negotiate your loan with lenders.

Advantages of business loans for small business

When utilized wisely, small business loans can yield several benefits: 

• Growth potential: Expand operations, enter new markets, or invest in technology. 
• Effective cash flow: Maintain liquidity, allocating funds for expansion.
• Competitive edge: Improve infrastructure and gain advantage over competitors.

How can TallyCapital help?

Navigating the loan process in India can be daunting, but with the right partner, it becomes smooth. TallyCapital offers customised solutions to meet your business needs:

• Professional consultants to guide you in getting a loan.
• Easy and fast loan approvals 
• Transparent terms and conditions with competitive interest rates.

Conclusion 

This step-by-step guide equips you with the knowledge to confidently approach your first business loan application. Securing the right loan isn’t just about funding- it’s about building a partnership that supports your vision. 

At TallyCapital, we understand that every business is unique. We don’t believe in cookie-cutter loan options. Instead, we focus on your specific needs, offering a range of customised business loans to fuel your growth. Whether you’re looking for a small boost to cover cash flow or a larger amount to drive expansion, we’re here to make the process simple, transparent, and stress-free.

Funding is a crucial component of the capital structure for any business organisation serving as an indispensable requirement for its growth and sustainability. Whether you are planning to expand production, acquire assets, buy new machinery, or simply cover daily operational costs, choosing the right loan can significantly impact your business’s success. Two of the most commonly opted-for loan types are business mortgages and unsecured loans. 

But how do you decide which one aligns with your requirements? This guide explores each option to help you make an informed decision.

What is a business mortgage?

A business mortgage is a type of secured loan that requires borrowers to provide collateral, such as business property, machinery or equipment. This collateral acts as security for the lender in case of default. It is ideal for businesses that need substantial funding repayable over a long period.

Features of a business mortgage

• Collateral-based: Your loan is tied to an asset; hence, lending is done based on the value of the security offered.
• Long tenure: Business mortgages are usually granted for flexible tenures, meaning that the money has to be repaid over several years or even decades.
• Lower interest rates: As the loan is secured based on an asset or property, the interest rates are slightly lower as compared to unsecured loans.

Advantages of a business mortgage

• Affordable interest rates: Business mortgages are cost-effective over the long run. 
• High borrowing limits: These loans provide access to substantial funding, making them suitable for large investments such as buying land or buildings or expanding the infrastructure.
• Flexible repayment terms: The loans normally have longer tenures that help to ease the monthly cash payback pressure.

Disadvantages of a business mortgage

• Risk of asset loss: Failure to meet the required payment could result in the seizure of the collateral.
• Lengthy approval process: Approvals may take weeks or even months due to extensive documentation and property appraisals.
• Limited flexibility: These loans are often restricted to specific purposes, such as asset acquisition.

Understanding unsecured loans

Unsecured loans, as the name suggests, do not require collateral. Instead, lenders access your credit history, credit rating and repayment capacity. These loans are suitable for businesses needing quick access to funds for operational or expansion purposes.

Features of unsecured loans

• Collateral-free: No assets are required as security, making them ideal for businesses with little capital.
• Quick disbursal: Minimal paperwork ensures faster loan processing and disbursement. 
• Short to medium tenure: Repayment periods typically range from 1 to 5 years.

Advantages of unsecured loans

• No collateral required: Ideal for small companies or startups, with no collateral to offer to secure a business loan.
• Faster processing: Reduced documentation enables quick access to funds, often within a week at most.
• Flexibility in usage: Funds can be utilised for various purposes, including marketing, inventory, or payroll management.

Disadvantages of unsecured loans

• Higher interest rates: Because of the associated risks, lenders charge high interest rates.
• Lower loan amounts: Borrowing limits are smaller compared to secured loans.
• Credit score dependence: Approval heavily relies on your financial record and credit score.

Comparing business mortgages and unsecured loan

Key factors to consider before choosing one

When deciding between a business mortgage and an unsecured loan, consider the following factors:

Business needs:

• For long-term investments, such as property purchases, a business mortgage is more suitable.
• For short-term needs, like managing cash flow or operational expenses, an unsecured loan is preferable.

Financial health:

• Businesses with valuable assets can benefit from the various terms of a business mortgage.
• Startups or businesses without collateral should consider unsecured loans.

Repayment capacity:

• Secured loans normally offer small and easy-to-pay EMIs each month with a longer repayment period.
• Unsecured loans have shorter repayment tenures and higher monthly installments.

Conclusion

Choosing between business mortgages and unsecured loans in India depends on your specific business requirements, financial health, and repayment capability. Both options have distinct advantages and limitations.

At TallyCapital, we understand the unique challenges companies face, especially in the Indian market. Whether you’re considering an unsecured loan or a business mortgage, our integrated solutions ensure your needs are met. We strive to provide reliable and effective loan services tailored to your needs. TallyCapital promises customised loans at competitive rates.  You can get quick approvals on loans and expert financial advice at every step.

So, you’ve got a vision! A game-changing product or service is ready to roll out, but there’s one little thing missing—funds to get started. Most successful businesses, from local stores to global giants, began by securing capital to fuel their growth.

Today, new small business loans and startup business loans offer budding entrepreneurs like you the financial push needed to kick things off. But if you’re a small business owner wondering how to navigate the loan application maze, here’s a straightforward guide to help you on your way.

Let’s walk through how to secure MSME loans for startups or new business loans in a simple, step-by-step journey.

Step 1: Know your loan options

Think of loans as different shoes—you wouldn’t wear hiking boots to a beach. As particular shoes suit specific occasions, each loan type serves a different business need. To pick the best fit, let’s break down the main types of loans available for small businesses.

• MSME & SME loans: If you’re running a micro, small, or medium enterprise, this type of loan is tailored for you. It’s designed to fund daily operations or growth projects for smaller businesses.
• Working capital loans: Ideal for day-to-day expenses, working capital loans keep things moving when cash flow is tight. It’s like a safety net for payroll, rent, or other overheads.
• Equipment loans: If machinery or technology is central to your business, an equipment loan can help cover necessary tools or upgrade costs.
• Invoice financing: If you’ve got cash tied up in invoices, this loan type lets you get a large portion of your receivables upfront while the lender waits for customer payments.
• Startup business loans: This is perfect if you’re in the early days of your entrepreneurial journey. These loans give you that initial cash boost to get your business running.

With your loan type in mind, you’re already one step closer to securing your first new business loan. Ready to keep going?

Step 2: Calculate your loan needs with an EMI calculator

Now, let’s talk about loan affordability. Imagine you’re eyeing a piece of equipment or planning an expansion—how much should you borrow? And can you handle the repayments? This is where a business loan EMI calculator becomes your best friend.

Most lenders offer this tool on their websites. Enter the loan amount, interest rate, and tenure, and you’ll see your estimated monthly EMI. Knowing these numbers upfront can help you borrow wisely and ensure you’re comfortable with the repayment schedule.

Pro Tip: Keep your monthly EMIs manageable so your company can grow without financial stress.

Step 3: Get your documents ready

Think of documentation as the ID for your loan application—it tells lenders who you are, what you’re about, and how you plan to succeed. Preparing documents in advance keeps the process smooth and hassle-free. Typically, you’ll need:

• Completed loan application form: This is your first impression, so fill it out accurately and double-check the details.
• Business plan: Be clear about your goals, current standing, and how you’ll use the loan funds. This isn’t just paperwork; it’s your chance to convince lenders you’re on a winning path.
• Financial statements: These give lenders a look into your business’s financial health, so include recent bank statements, tax returns, and balance sheets if available.
• KYC documents: Proof of identity, business registration, and other KYC (Know Your Customer) documents establish you as a reliable borrower.

Step 4: Build a strong business profile

If you’re wondering what happens behind the scenes after submitting a loan application, here’s the scoop: lenders will check everything from your credit score to your business’s track record. It’s all about gauging how likely you are to repay. Here’s what you can do to make sure your profile shines:

• Maintain a good credit score: A score above 700 can be your golden ticket to better loan offers. If it is lower, consider improving it by paying off smaller debts or handling existing credit responsibly.
• Create a detailed business plan: Show how the loan will impact your business. Lenders want to know their funds are going toward growth and success, not just covering losses. Use your business loan calculator to make realistic financial projections.
• Select the right loan type: Choose the loan that matches your purpose. If you’re clear about your goals, you’re less likely to run into bad debt or mismatched repayments.

These steps increase your chances of approval and help you secure a competitive business loan interest rate.

Step 5: Submit and await approval

Once you’ve found the right lender, completed your application, and gathered documents, it’s time to hit submit! Nowadays, many lenders offer a seamless online application process, meaning you can apply for new small business loans from the comfort of your office or home.

What to expect next:

• Verification: Lenders will verify your documents digitally or by reaching out.
• Approval and disbursement: Once everything checks out, your loan is approved, and the funds are coming!

If there are any hiccups, don’t hesitate to keep in touch with your lender—they’re often willing to answer questions and work with you on the finer details.

Conclusion

With this step-by-step guide, you’re now equipped to approach your first business loan application with confidence. Remember, securing the right loan is about the funds and building a partnership supporting your vision.

At TallyCapital, we understand that every business is unique. We don’t believe in cookie-cutter loan options. Instead, we focus on your specific needs, offering a range of customised business loans to fuel your growth. Whether you’re looking for a small boost to cover cash flow or a larger amount to drive expansion, we’re here to make the process simple, transparent, and stress-free.

Are you looking for small business loans to grow or expand your business? You will find a plethora of choices. While traditional banks have always been available to offer loans, you will find many more options today, such as finance companies, non-banking finance corporations, private lenders, and more.

One of the first questions that might pop into your mind is whom to approach for a business loan. Should you go to a traditional bank, or will a modern/advanced finance company suit your needs?

This blog will help you understand more about choosing the right option when seeking financial assistance for your business.

Before we get into the details, here is the answer to the main question—we cannot pinpoint one particular option and declare it the best loan provider. The choice will depend on your business’s requirements and other factors. We will see more of these in the following sections.

Bank vs finance company

Wondering which one offers the best business loans? Here are some factors you should consider before choosing the one that suits your requirements the best.

Size and age of business

If you have been in the business for a long time, and if the size of your business is quite big, you can choose a bank for financial assistance. Traditional financial institutions like banks look for the history, long-standing nature, creditworthiness and size of the businesses before approving their loan application. 

However, if you are a newbie and don’t have much credit history to show, you can approach a finance company for your loan. Yes, the interest rates may be higher than what banks would charge you, but you can be assured that your loan application will not be rejected by these companies. If you are looking for a small business loan, a finance company would be the better choice for you.

Documentation and collateral requirements

Banks require you to submit detailed documentation, business reports (like financial statements, tax return copies, etc.) and collaterals before approving your business loan. The process of loan disbursement is slightly longer here, because banks need to check all these documents, verify the authenticity and then proceed to approving the payment. So, if you have enough documentation and collateral, the banks require, you can approach them for your business loan requirements.

However, if you have a newly established small business, you may not have the necessary financial documentation and collateral that banks demand. In that case, you can opt for a finance company for financial assistance. This is because the loan formalities of these lending agencies are quite flexible, and most don’t require businesses to submit any collateral before approving loans.

Affordability

You will notice a stark difference in the interest rates charged by finance companies and banks when you apply for a business loan. The former often has higher interest rates than the latter because of their flexible processes, quicker process time, simpler documentation, non-requirement of collateral and other reasons. 

On the other hand, banks charge reasonable interest rates because they follow a more systematic and rigorous loan approval process. You can opt for a finance company if you can afford the high interest rates they charge. Small businesses may not be eligible for business loans from banks; hence, it is highly recommended to go for finance companies only if the interest rates fall within your budget.

Waiting time

Are you in urgent need of a business loan in India? Approaching a bank may not be the right option for you in that case! Even if you submit all the documentation on time, banks take a long time to check and verify it before sanctioning the required loan amount. Usually, you receive the funds in your account only after a few weeks from submitting all the documents and financial reports.

Finance companies, on the contrary, have quicker processing times because their loan approval process is very flexible. Once you have submitted the basic information required by these firms, you can expect the funds to be credited to your account within 24 to 48 hours. So, if you are hard-pressed for funds in your business, approaching a finance company would be the right option.

Conclusion

As you can see, banks and financial companies have their own merits and demerits when it comes to loan approvals. Hence, it is always better to assess your requirements first and then choose your lender wisely for the best possible results. For example, business loans for small business owners may be more practical when taken from a finance company than a bank.

If you are a small business looking for quick business loans, you can approach TallyCapital right away. If you are using TallyPrime as your business software, all you need to do is select the add-on feature, TallyCapital, for quick business loans. 

Once you check your eligibility and apply for your business loan here, TallyCapital connects you with the relevant financial partner to ensure you get the funds into your account as early as possible. 

Running a business can bring new challenges every day—unexpected expenses, seasonal fluctuations in sales, or just the usual hustle to keep everything running smoothly.

A working capital loan can be the perfect solution for businesses to meet short-term cash needs without tapping into funds reserved for long-term goals. Whether you’re facing a sudden office renovation, payroll expenses, or a slow season, this loan could be your secret weapon for keeping everything on track and thriving.

What exactly is a working capital loan?

Simply put, a working capital loan is a short-term loan designed to cover a business’s everyday expenses. Unlike a credit for purchasing a new property or large equipment, this loan is strictly for funding your company’s day-to-day needs. It’s a flexible solution that doesn’t limit you to specific expenses; instead, you can decide how best to put it to work in your business.

Financing options such as working capital term loans, revolving credit lines, and other business working capital loans help keep your business operations steady, even when cash flow is tight. These loans don’t require any long-term commitment and allow you to handle immediate needs or emergencies, making them particularly useful for small businesses and MSMEs.

Why might your business need a working capital loan?

Imagine having the perfect opportunity to buy discounted inventory or needing to hire additional seasonal staff. Without accessible cash, you might miss out on these advantages. This is where working capital loans enable the business to make moves without waiting for time to replenish cash. Below are some situations when a working capital loan can be useful:

• Seasonal sales cycles: Some businesses, like retail or tourism, perform well or poorly at certain times of the year. When sales go down, a working capital loan allows you to pay for overheads like rent, bills, and wages.
• Business growth: Growth inevitably requires additional costs. A working capital loan can help meet the operational costs of business expansion, allowing you to make profits over time instead of using reserves to expand and grow.
• Dealing with contingencies: Things like machinery breakdowns, key employee absences, or even the failure of a particular order to be completed may hinder sales revenues. A working capital loan helps a business have the necessary dependents for its activities to run smoothly without any hindrance.

Types of working capital loans: choosing the best fit for your business

1) Working capital line of credit

Think of this as a business credit card with a more flexible and larger credit limit. A line of credit is available whenever you need it and doesn’t require re-approval each time, so you’re free to access it as cash flow demands. This makes it an ideal fit for businesses facing unpredictable expenses.

2) Working capital term loan

Consider a working capital term loan for a structured, one-time cash infusion. You receive a lump sum upfront and then can pay it back over a fixed period. This is ideal for businesses with defined cash flow issues or one-time expenses. It offers predictability with a fixed interest rate, allowing you to plan your finances efficiently.

3) Invoice factoring

If you’re waiting for bills, invoice factoring lets you unlock immediate cash by selling those invoices to a lender. This approach provides cash flow support without taking on traditional debt, which can benefit businesses with larger receivable outstandings.

4) Merchant cash advance (MCA)

With an MCA, you receive a cash advance based on your future revenue. You can repay by giving a portion of your daily sales, so it’s well-suited for businesses with daily transactions. However, it’s essential to consider the costs and potential impacts on cash flow.

Pros and cons of working capital loans

Pros

• Flexibility: A working capital loan helps cover anything from payroll to seasonal stock.
• Quick access: Some lenders can provide same-day or next-day approval, giving you fast access to funds when needed.
• Less collateral required: Many working capital loans don’t require significant collateral, allowing smaller businesses without large assets to gain funds.
• Preserve ownership: Unlike equity financing, working capital loans allow you to maintain full ownership of your business.

Cons

• Higher interest rates: Short-term loans often have higher rates than traditional ones.
• Short repayment periods: Short terms mean you must be prepared to pay it back quickly, so consider your cash flow when choosing a loan.
• Risk of debt cycle: Frequent borrowing can lead to a debt cycle if improperly managed.

When to secure a working capital loan for your business?

If your business is cyclical, frequently encountering occasions where expenses outstrip revenue, a working capital loan might be just what you need. Startups, SMEs, and MSMEs also often benefit from these loans because they provide a financial lifeline for maintaining operations and growing. Here are some ideal times to consider applying:

• Managing operating expenses: When you have to cover essential expenses like payroll, rent, or utilities during slower months.
• Seizing growth opportunities: when hiring new staff or buying inventory when demand spikes.
• Handling unexpected repairs or delays: To keep the business steady during emergencies or waiting for payments.

How to apply for a working capital loan?

Applying for a working capital loan is straightforward. You can approach traditional banks, online lenders, or credit unions. Generally, online lenders provide faster approval and funds than banks, but they may come with higher interest rates.

Banks or credit unions are good choices for businesses with strong credit histories and competitive rates.

To apply, you’ll need basic financial documents, such as profit and loss statements, balance sheets, and proof of revenue. Once approved, you can typically access funds within a few days, depending on your lender.

Conclusion

At TallyCapital, we know that every business is unique. That’s why we don’t believe in one-size-fits-all solutions. Instead, we work with you to understand your specific needs and goals, crafting business working capital loans that suit your situation.

Our approach ensures you get a straightforward, effective loan option tailored to help you grow without unnecessary complexity. Contact TallyCapital today, and let us help you confidently reach your business goals!

Applying for a startup business loan in India as an entrepreneur can be challenging if you don’t have a fair idea about the credit types available and their terms. With countless options out there, comprehending the eligibility criteria, necessary documents, and application process can be critical in enhancing your chances of getting through. This is a complete guide to business loans for startups in India, covering basic tips for new entrepreneurs like you.

Eligibility for a business loan

You must satisfy certain essential business loan eligibility criteria to get fund approval. These are:

• The age of existing businesses should not be more than five years.
• Annual turnover/ revenue should not exceed INR 25 crores in a single financial year.
• Business loans are available only to Limited Liability Partnerships (LLPs) or Private Limited companies, not proprietorships or partnership accounts. 
• Eligible applicants should also obtain DIPP approval.
• Government startup loans need certain guarantees.

Documents required for business loan

While applying for a startup business loan, you will be required to submit the following documents: 

• Photographs: Two passport-size copies
• Identity proof: PAN card, passport, aadhaar card, voter’s ID, driving license 
• Address proof: passport, driving license, aadhaar card, postpaid phone bill, voter’s ID
• Bank statement: Last six months 
• Income proof: Income tax returns, salary slips, PAN card 
• Proof of bank account:  Cancelled/scanned cheque, passbook’s front-page copy 

Factors determining the approval of business loans

Whereas sanctioning business loans remains exclusively at the discretion of the financial institutions, several factors go a long way in affecting your odds of availing of the credit. The following are five of the most important factors you need to know:

Nature of the business: The kind of business you seek a loan for may be the most important factor determining the business loan approval. This is because the magnitude of risk varies for each type of company or industry they are in. A bank may become unwilling to lend money to certain high-risk businesses. 

Profitability: Your net profit can directly affect how much credit you get. Financial institutions have a minimum turnover eligibility for sanctioning loans. The higher your profitability, the better your chance to get that elusive business loan.

Credit history: Banks and other financial institutions provide loans only when they are pretty much assured that the entrepreneur can repay the amount. This surety is mostly assessed through the CIBIL score of the applicant. Having a high CIBIL score can help you get a business loan.

Business plan: Often, the companies that lose out on a loan sanction are those that fail to draft a well-formatted business plan. Properly writing a business plan, coupled with intentions on how the loan could be used, helps move the decisions in favour of the applicant.

Documents: Like all types of loans, the success of getting business loans depends on the documents the businessperson submits to the lending institution. Have all the necessary paperwork ready before going to the lender to secure a loan for your business.

Recommendations for new entrepreneurs

It seldom happens that a budding entrepreneur successfully gets a business loan sanctioned. A few suggestions that can increase your chances of getting credit approval are: 

Prepare a good business plan: A thorough business plan will help you get a business loan. This should be a document that shows your business goals and financial projections and describes how you plan to use the money from the loan.

Maintain a good credit score: Maintaining a good credit score can help you obtain a business loan. So, don’t let a payment of a bill or an installment get delayed. 

Prepare a complete loan application: Ensure that your loan application is very comprehensive and carries all essential documents. 

Learn about the government loan schemes: The Indian government offers various loan schemes for MSMEs and startups. MSME loans for startups are also available. Learn about them and apply accordingly.

Use professional services: If you are a novice in the world of business, get professional help. Reach out to a financial advisor or a business consultant and increase the chances of getting your business loan approved.

Conclusion

Acquiring funding through business loans during the initial phase of a business can sometimes be very challenging. However, once you know how to become eligible for a business loan, what documents will be needed, and what other government schemes exist, you are well on your way to getting that fund. With the right approach and a little patience, you can secure funds for your venture.

At TallyCapital, we believe that every business is unique, with different challenges and potential. Thus, we provide customised business loans that fit your needs. We won’t stuff you with complicated loan structures; instead, we help you realise your business goals by listening to what you need and carefully formulating solutions that will best suit your needs.

Related Blogs: 6 Different Uses of Business Loans: How to Get Started

Are you planning to start a new business and be your own boss? If yes, you must do detailed financial planning to run your business without disruptions or hassles. A strong financial base is essential for any business to succeed. At least one-third of Indian startups fail within a year, often due to a lack of sufficient funding.  

To ensure your business has a continuous supply of funds for day-to-day activities, you can opt for startup business loans. With the advent of technology, access to these loans is now easier than ever. According to a recent survey, at least 70% of businesses with less than two years of experience use new business loans to grow and expand. 

If you are still wondering how a startup business loan can help you, this blog is for you. It will walk you through the multiple benefits you can enjoy by applying for these startup loans.

Advantages of startup business loans

A startup business loan can help entrepreneurs turn an innovative idea into reality. It can provide the following benefits to the borrower:

Easier to access

If you are a small business owner, you might not have sufficient credit history or credibility to qualify for traditional bank loans.  Even if you do, procuring traditional business loans is a tedious process and takes time. 

This is where new small business loans can help you to a great extent. Startup business loans are accessible with much less effort compared to business loans from large banks. These loans require minimal documentation and can be processed quickly. In most cases, these loans are disbursed to your account within 24 to 48 hours from the time of application. 

If you need urgent financial assistance for buying new machinery, adding inventory, etc., you can apply for these loans and continue with your operations as usual.

Increased liquidity

You can carry out your regular operations without any disturbances only when you maintain sufficient liquidity. The funds used for routine operations like electricity, salaries, rent, etc., must always be adequate. Most businesses, especially smaller ones, shut down within a year or two due to dangerously low working capital and liquidity levels.

If this situation resonates with you, consider taking an MSME loan for a startup. These loans for micro, small and medium enterprises are of great help to small businesses. These loans are available for short-term, medium-term and long-term. These loans help small business owners easily meet urgent working capital needs, ensuring smooth operations. 

Flexibility of options

One of the key advantages of startup business loans is the flexibility they offer in terms of loan amount, repayment tenure and type of loan. If you have a good credit history or a high credit score, you can even negotiate for a lower interest rate with your lenders.

Depending on your requirements, you can choose from a variety of startup loans. If you need financial assistance to buy new or advanced machinery, you can opt for exclusive equipment financing loans. You can even sell out your outstanding invoices to a third party by using invoice factoring services. If you are looking for loans to fund regular operations, opt for working capital loans and so on. 

These loans have made financial assistance easily accessible, quicker and hassle-free than before. 

Conclusion

Startup business loans can immensely help if you want to set up your small business and continue operations smoothly. With these loans, you can update your inventory and invest in advanced machinery to increase productivity and gain an edge over your competitors.

If you are looking for affordable, quick and effective startup business loans, consider TallyCapital for all your needs. Check your eligibility and apply for a loan. TallyCapital has tie-ups with some reputed lenders in the market, such as, Kotak Mahindra Bank, FlexiLoans and L&T Finance. Once your loan application is approved, you will receive the funds in no time.

Read more: 8 Types of Different Business Loans – How to Find Your Ideal fit

Many Indian entrepreneurs or small business owners face a painstaking dilemma while seeking business funding. They often get confused about whether to opt for a secured or unsecured business loan. Both types of financing have benefits and drawbacks, and the choice between them depends upon various factors, including the financial health of the business, growth plans, and the businessperson’s credit score.

What are secured business loans?

Secured business loans require collateral, such as real estate, equipment, and other valuable assets, to obtain the credit amount. Since there is security, the lender offers low interest rates and easier terms. Secured business loans are especially good for businesses with valuable assets looking for bigger credit amounts or better interest rates.

Types of secured business loans in India

There are several secured business loans available in India, and a few of them are mentioned below: 

• Term loans: These are loans advanced in a single lump sum and to be repaid with interest over a fixed period. Business assets are used as collateral.
• Equipment finance: Equipment finance can essentially be regarded as one of the loan options used by businesses for purchasing new equipment or for upgrading current ones. The loan is granted against the support of the equipment itself as collateral.
• Business loan against property: In this credit type, businesses can obtain sizable financing using their business or residential property as security. The advantage here is the longer tenure and lower interest rate.
• Gold loan: Here, the gold of the applicant is used as collateral in exchange for speedy finance. The borrower can obtain quick sanctioning, easy repayment, and relatively lower interest rates.
• Project loans: In this category, big projects involving infrastructure development or real estate construction are funded with sanctioned money. The sum allotted to the loan applicant is often disbursed in phases corresponding to the different stages of the work, such as planning and execution.
  

What are unsecured business loans?

Unsecured business loans for MSMEs do not demand any security but are based on the borrower’s creditworthiness and financial history. Most of these credit types carry higher interest rates and tougher eligibility criteria. Yet, they allow easy access to finances and are well suited for businesses without many assets.

Types of unsecured business loans in India

There are many types of unsecured business loans available in India, such as:

• Working capital loan: This is a short-term loan made available to businesses to manage their day-to-day operations smoothly. It can be used for various expenses, including the purchase of inventories, payment of salaries, and other costs.
• Cash credit: It is another type of working capital loan from which businesses can withdraw funds up to a certain limit. Interest is charged only on the amount utilised.
• Overdraft facility: Businesses can withdraw amounts over and above the available funds in their account up to a limit to meet immediate short-term demands.
• Letter of credit: This is a financial contract issued by the bank of an importer or buyer to the seller, guaranteeing that money will be received from the buyer on the due date and time. It plays an important role in reducing the risks of international transactions.
• Factoring refers to a business selling its accounts receivable, or invoices, at a discount to acquire immediate cash. The process reduces the time taken in collections and helps improve a business’s cash flow.
• Startup loans: These loans are specifically designed for newly established companies. They often come with flexible terms, which can benefit early-stage growth. The primary challenges when applying for this type of loan are the dearth of collaterals and restricted operating history.

Advantages and disadvantages of unsecured business loans

Although unsecured loans in India offer several benefits, they also come with some drawbacks. Let’s check the pros and cons.

Advantages:

• No assets are required as collateral
• May offer quick funding
• Available to different kinds of borrowers

Disadvantages:

• Interest rates could be much steeper
• Requirements may be more stringent
• It may require a personal guarantee
  

Is an unsecured business loan better than a secured business loan?

The choice between an unsecured and a secured business loan would depend on the business’s financial condition, creditworthiness, and growth plans. The former would be perfect for firms with very few or zero assets, whereas the latter is the answer when huge funding is required or better interest rates are desired.

Business loans have become common in the Indian market today. Owing to the quick availability of the best online unsecured loans, enterprises do not encounter much hassle in gaining capital. However, most lenders demand higher interest rates and lay down strict rules for accessing funds. 

Secured business loans normally have lower interest rates and better terms for the business but always require collateral, which is usually a big problem for many businesses. This may become a hurdle, especially when businesses have no valuable assets.

Entrepreneurs and small business proprietors must weigh their options and consider interest rates, repayment terms, and the requirement for collateral when making the best choice.

Conclusion

In short, secured and unsecured business loans both have pros and cons, and what suits a business best depends on the case. Entrepreneurs and small business owners should make decisions appropriate to their businesses after carefully considering the interest rates, repayment terms, and collateral requirements of both loan types.

At TallyCapital, we believe that every business is unique, with different challenges and potential. Thus, we provide customised unsecured business loans that fit your needs. We won’t stuff you with complicated loan structures; instead, we help you realise your business goals by listening to what you need and carefully formulating solutions that will best suit your needs.

Read more: 5 Advantages of Taking Unsecured Loans

This season of festivity is a good time for businesses to increase their sales and revenue. However, it will be necessary to have enough stock. From this perspective, the role of inventory management in meeting customer requirements without delays is critical. 

Whether you are a small retailer or an enormous enterprise, the potential to stock up ahead of time would be what makes or breaks your success in the festive season. You can prepare yourself better by boosting your inventory through business funding loans.

Here, we will see why inventory is important and how you can get a business loan to meet your inventory-related requirements.

The importance of inventory

Inventory is the backbone of any retail or product-based business. If you run out of stock, there is a high possibility that you will disappoint your customers, and also fail to maximise the sale. In the worst-case scenario, it can earn you a bad reputation. 

Poor inventory handling leads to stockouts, overstocking, or loss due to unsold products. Therefore, businesses must maintain the perfect stock balance. The festive season, especially, is a golden chance for you to improve your profits by increasing your sales.

Why stocking up is important during the festive season

Listed below are significant reasons establishing why you should stock up in advance.

Peak demand

Since consumers spend during festivals, the demand is high during the festival season. This also happens to be a good time for celebrating, and people will seek gifts, lights, and other novelties for the festive season. 

In case your firm is not well prepared for such increased demand, you may face problems in delivering orders on time and, worse, lose customers to other firms that are adequately prepared.

Higher profit margins

Festive sales usually have more than the average profit margin because most customers tend to open their purses and wallets without batting an eyelash. Stocking high-demand goods, therefore, gives the perfect opportunity to capitalise on the customer’s desire to spend; this, in turn, results in ample mileage in terms of profits. You can consider business financing to stock up during these times.

Promotional campaigns

The majority of businesses go all out during the festive season and attract customers with promotional offers and discounts. Without your optimum level of inventory, such campaigns may turn out to be nightmarish for you since you will not be able to fulfil the orders. Thus, you must prepare well in advance by keeping enough stock on hand to deliver all the promises you made through your promotional campaigns. 

Build brand loyalty

With adequate planning, a business ensures that customer needs are met during the festival seasons. Consequently, trust and loyalty evolve from a hassle-free buying experience, especially when everything they need is available. Consistent customer service encourages a cycle of repeated purchasing behaviour and fosters long-term loyalty.

How business loans help in inventory management

For most businesses, cash flow is always the biggest challenge in the festive season. The need to stock up a good amount of inventory means a significant upfront investment on the part of the business. Here is where business loans come to your rescue. Even if the size of your business is small, you will find many financing options to help with your inventory requirements.

Here is how a business loan can help boost your inventory during the festive season —

Access to required capital

Business working capital loans and other financing options immediately supply you with liquidity to buy inventory. Instead of living off existing cash reserves, you can fund purchases from the loan to get yourself stocked in full without depleting your cash flow. This is particularly helpful for small businesses since they don’t have the liquidity to make large purchases at once.

Bulk purchases with lesser costs

Getting a loan will enable businesses to purchase stock in bulk. Most suppliers give discounts for bulk purchases. You can lower the cost per unit of your business when selling these items during the festive season, thereby raising your profit margins.

Opportunity for product diversification

With more capital, a business has the potential for stock diversification. With business capital loans, you can upgrade your inventory with many new and trending items. The more diverse your product range, the higher your chance of increasing sales.

Conclusion

The festive season is always exciting as well as challenging for businesses. There are many opportunities to increase sales and revenue, but you would need an adequate amount of stock. This helps you to cater to customer demand and avoid any possibilities of stockouts, thereby maximising your profit margins. 

Business loans can help you to a great extent in this case. Apply for a business loan with TallyCapital by following simple steps.TallyCapital is a platform where you can quickly check your business loan eligibility and apply for financing. Use this to get quick cash and boost your inventory to make the most of the festive season. 

Every business owner needs capital to grow, expand, and innovate. However, whenever you go to a bank or financial institution, they first ask for collateral security, which can be a significant hindrance for many entrepreneurs. Fortunately, today, you can get a business loan without collateral easily and with just a few clicks.

Here are some easiest ways to get an MSME loan without any collateral security. You just need to check the right boxes, and you can easily get a collateral-free business loan.

What do you understand by a collateral-free business loan?

Most traditional lenders, like banks, ask for collateral, such as inventory, property, gold, or equipment, to minimise risk. However, most start-ups or small business owners do not have the liberty of easily providing collateral since they have limited assets.

Due to this challenge, they are compelled to depend on their savings, credit cards, or high-interest personal loans, which can hamper progress and escalate their financial risk. New business loans without security provide an easy solution, allowing business owners to access funds without putting their possessions at risk.

A collateral-free or unsecured commercial loan does not entail applicants keeping their assets, such as inventory, equipment, property, or other securities, to obtain funding. These loans are provided based on the character, capacity, cash flow, conditions, creditworthiness, and commercial performance of the applicant.

Eligibility requirements for a business loan without collateral

Firstly, you need to evaluate your eligibility for getting a collateral-free loan. The eligibility requirements vary according to lenders; however, some general requirements are the same, such as —

Credit score:

Your credit score replicates your credit history and your credit habits. The most popular credit rating agencies are CIBIL, Experian, and Crif High Mark. Most lenders require a good credit score. An ideal credit score is above 750. If your credit score is below 750, it does not mean that you will not be able to secure a loan; however, since it is riskier, the terms and conditions will vary, and you might be charged a higher rate of interest on the same loan.

Business age:

Most traditional lenders look for a minimum business age of one to two years. Having an operational business for 3 years is ideal before most lenders would be willing to sanction an unsecured business loan. However, many schemes and options are available for business owners and start-ups who have just begun their operations and need capital to expand their entrepreneurial ventures.

Revenue and annual turnover:

The revenue you generate during the whole financial year is your annual turnover. It plays a deciding factor in the quantum of loans sanctioned by banks and other financial institutions. It is crucial to have a consistent and steadily increasing turnover as well as profitability. The higher the revenue, the higher the quantum of loans, and vice versa.

You must confirm your business has a steady cash flow from operations to meet the repayment plan. Unsecured loans usually have higher interest rates compared to secured loans, starting from 10% and going up as high as 24% per annum.

KYC documents:

You need to have your credentials and documents ready for securing a business loan. You need to have the following documents to get your loan sanctioned —

• Personal Identification Documents, such as PAN Card, Aadhaar Card
• Address Proof, such as an Aadhaar Card or Electricity Bill
• Business Proof, such as UDYAM Aadhaar Registration
• Business Registration Documents such as GST Registration
• All the Licenses Required for Your Business
• Income Tax Returns
• Project Reports
• Bank Statements ( 6-12 months)
• Financial Statements (Profit & Loss, Balance Sheet)

All the lenders are under the purview of RBI to strictly follow the “Know Your Customer (KYC)” Norms that include establishing the identity of the individual as well as the business.

Choose the right lender for your MSME business collateral-free loan:

You can choose to apply for a loan from Banks, Non-Banking Financial Companies (NBFCs) and  Fintech Lenders that provide speedy access to funds without collateral.

Conclusion

Getting a business loan without collateral is a prudent choice for entrepreneurs who lack substantial assets but have robust business potential. Remember to always evaluate loan terms sensibly before making a decision. 

At TallyCapital, we identify that every business is unique, with its own set of challenges and opportunities. Thus, we are committed to providing you with modified business loans that cater to your specific needs. Our objective is to help you achieve your business goals, not to burden you with complicated loan structures.