A collateral-free business loan is a loan which is provided without taking assets or securities as guarantee of repayment. These loans must be repaid along with interest over a predetermined time period. Collateral free short term business loans are offered by scheduled banks, private banks, co-operative banks, micro finance companies and non-banking financial companies apart from the unorganized sector in India.
There are several ways in which working capital can be obtained in India. Here are some examples.
- Self funding: New businesses sometimes resort to self-funding, when they are seeking for finance. Friends and family are a trustworthy source of finance and they may or may not seek interest for the loan provided.
- Seed Funding / Angel Investment: After thoroughly checking the profile of the business with the prevailing trend in the economy and market, seed funding companies or angel investors may feel confident about investing in the business.
Some of the prominent companies which were supported by angel investors are Google,Yahoo and Alibaba.
In India, Indian Angel Network,Mumbai Angels,Rajan Anandan,Anupama Angels are among the more popular angel investors. Angel investment is relatively smaller than the venture capital.
- Venture Capital: Venture Capital funding normally comes from firms which specialize in providing capital in exchange for equity in the organization. Venture capital firms are managed by professionals with a high acumen in managing funds. These professionals provide expert advice, act as a mentors to help businesses of interest to become successful. Venture capitalists exist the business when there is an IPO or when there is a takeover. They look for opportunities to invest that seem stable in nature, so that they can cash out in 3 to 5 years.
- Business Loan from Micro Finance or Non Banking Financial Corporations:
Micro finance companies offer business loans to low income population who have dreamt of starting their own business. Micro finance is considered to be one of the most effective ways to change the economic status of ambitious people from low income groups, as it helps fund their business ideas.
Take the following points into consideration while evaluating a collateral-free small business loan.
- EMI amount
- Speed of loan disbural
- Processing fee or hidden charges, if any
- Prepayment charges
Documents required for the Collateral free Business Loan in India.
- Identification proof of the business.
- Duly filled application form.
- 3 passport size photographs.
- Business profile and projections for the next 5 years
- Cash flow and funds flow statements which are duly certified by the CA.
- Address proof of the business.
- Bank account statement for the past 6 months.
- Registration certificate or proof of incorporation
- Income Tax acknowledgment for the past two years.
- Ownership proof of residence or office.
RBL Bank Business Loans.
RBL Bank ideal solution to the Business Loan requirements of the small business.Some of the key features of the RBL are :-
- Loan disbursement from 10 Lakhs to 35 Lakhs.
- Convenient Loan repayment option of 12 months to 3 months.
- Collateral free loans and no security.
- Applicant age should be minimum 27 years till 65 years.
- Minimum 5 years of experience in the same business field.
- The applicant must own either residence or office in his name or jointly with the family member.
Capital Float offers collateral free working capital loans called Term Finance to small business enterprises. The loan amount ranges from Rs 1 lakh and Rs 1 crore. It is offered for a tenure of 6 months to 3 years. With flexible repayment options, no prepayment charges and quick processing, Capital Float is considered as the preferred choice by many SMEs.
Small and medium enterprises can opt for a Capital Float loan who has been in operations for at least 3 years and has a CIBIL rating of 650 or more. Also, the annual turnover of the enterprise should be a minimum of Rs 1 Crore.
So, key features of a term finance from Capital Float are:
- Business Loan provided up to Rs 1 crore.
- Quick approval and hassle free processing.
- Processing fee of only 2% with no hidden charges
- Less paperwork and documentation.
- Flexibility in choosing the tenure from 6 months to 3 years.