How To Get Small Business Loan Without Collateral in India

To secure a small Business Loan without collateral in India, you must prove that your business is financially stable with adequate cash flow to help you repay the loan. As per CRISIL estimates, the unsecured business loans sector in India is expected to grow at a CAGR of 18-20% till FY27, notably with financiers moving towards more evolved methods of approvals. This denotes the scope of getting a Business Loan without collateral, for which you must have a strong credit score, stable business operations, and the correct documentation. 

Guide to Securing a Small Business Loan Without Collateral

The path to securing a small Business Loan without collateral is straightforward. Unlike secured loans, you aren’t required to pledge assets like real estate, inventory, stocks or equipment for an unsecured loan.  

However, in case of collateral-free business loans, the absence of a security constitutes a higher risk for lenders. This is why it is important for Business Loan applicants to meet all eligibility criteria, submit all the required documents and apply with the right lending institution for a hassle-free loan experience. 

Step 1: Make Sure to Meet the Eligibility Criteria 

Before applying, the very first thing you need to ensure is that your business profile meets the minimum eligibility criteria of the lender. Lenders consider these parameters to gauge reliability, and it usually includes: 

• Credit Score: You should maintain a minimum score of 750 for both your personal and business CIBIL profiles. 

• Business Vintage: Your business must have been in existence for at least two to three years. 

• Turnover and Profit History: You must show that you have had consistent annual turnover and a clean record of profitability of at least a year. Lenders are also likely to have a minimum turnover requirement you have to meet. 

Step 2: Prepare Essential Documentation 

Once your eligibility has been verified, the next step is to get all the required documentation together. Well-organised documents always help make verification a smooth process. Typically, these include: 

• KYC Documents: PAN card, Aadhaar card.  

• Proof of Business: GST certificate, Udyam certificate, shop licence etc. 

• Financial Records: Income Tax Returns for the past few years, and six to twelve months of business bank statements. 

Step 3: Pick the Right Lender and Submit Your Application. 

The next step involves choosing a lender and submitting the Business Loan application. There are two major steps involved: 

• Choose the Right Lender: Compare offerings from reputed banks and NBFCs. NBFCs are often better for small businesses, offering faster approvals, fully online applications, and flexible eligibility. 

• Complete the Online Application: Upon finalising a lending institution, fill in the application with all the correct personal details and business information. Upload all documents prepared beforehand and submit the application for review. 

Also Read: Business Loan vs. Business Line of Credit: Which One Should You Choose? 

Benefits of a Collateral-Free Business Loan

An unsecured Business Loan has its advantages that make it particularly favourable for small businesses. 

• No Asset at Risk: You do not have to pledge your personal or business assets, be it property or machinery, as security, offering peace of mind. 

• Easy Application: The process for approval of the loan is faster because there’s no asset valuation to be carried out. In addition, digital-first lenders have streamlined processes requiring minimal documentation, and typically, funds are credited within a few days. 

• Access to Capital: Depending on the financial condition of your company and lender’s internal policies among other factors, you could obtain a high loan amount to fund heavy expenses, such as expansion and technological upgrades. 

• Flexible Repayment Options: These loans usually have flexible repayment options, letting you choose a schedule that suits your cash flow. 

Also Read: How to Use Your First Business Loan Effectively? 

Unsecured Business Loan Interest Rates and Fees

Several factors determine the charges levied on a collateral-free loan. It's good to be aware of these charges before finalising your application.  

• Interest Rate: Interest rates are directly linked with the lender’s assessment of your business profile. A stronger application (high credit score, consistent profitability, and cash flow stability) will be considered less risky; the applicant is thus likely to be offered a competitive interest rate. 

• Fees Charged: In addition to the interest amount, be aware of other charges that could potentially be levied. These typically include the one-time processing fees, normally a percentage of the loan amount, and documentation costs that are fixed. Always ask the lender for an itemised list of all fees applicable so that you know exactly how much the loan will cost you. 

Also Read: How Business Loans Take Your Business Higher 

To Conclude

Getting a small Business Loan without collateral is a simple and straightforward process, provided you meet all the criteria and pick the correct lender. In most cases, your business’s financial discipline and strong credit history are what will help you secure a loan. 

Poonawalla Fincorp offers collateral-free business loans up to ₹75 Lakhs with minimal documentation and without any hidden charges. Avail now to fund your business goals effortlessly. Apply today! 

Frequently Asked Questions

What factors influence approval for collateral-free business loans? 
A couple of factors are crucial when applying for a collateral-free Business Loan, including a good credit score above 750 and consistent cash flow from the business. These two factors give the lender the assurance that they can lend to you without the need for a collateral. 

What is the maximum loan amount I can get from a Business Loan without collateral? 
The maximum loan amount depends on your business’ annual revenues, profits, and specific credit profile. Poonawalla Fincorp provide collateral-free business loans up to ₹75 Lakhs. 

Could a new business get a collateral-free loan?
It is quite challenging to get a collateral-free loan for a new business. Most lenders ask for a business vintage of at least two to three years to show some history of stability and repayment ability. 

What decides the interest rate for an unsecured Business Loan? 
The interest rate rests upon the lender’s assessment of risk in dealing with your business. Normally, the interest rate is decided depending on factors such as your credit score, the turnover and profitability of your business, operational stability, and the tenure you have opted for. 

Can I get a Business Loan without collateral in India? 
Yes, as long as you meet the basic eligibility criteria and furnish the required documents, you can get a collateral-free loan in India without any hassle. 

What documents are required for a Business Loan? 
To get a Business Loan, you need to furnish KYC documents like PAN and Aadhaar card, proof of business ownership, and financial statements.