When it comes to business funding, raising external finance can be a trouble for many, especially when an enterprise is not well-established or lacks the necessary assets to mortgage. In such a scenario, businesses lookout for unsecured business loans. Especially in cities like Mumbai, where the number of small businesses has been on a steep rise, collateral-free business loans are much needed. These advances provide financing of high value, which can be used for a range of business spending needs. For instance, you can avail of a business loan in Mumbai to meet the operating expenses of the venture or purchase plant and machinery or even finance business expansion.
Eligible businesses can avail a financing value of up to Rs.25 Lakh easily as business loans. The eligibility and document requirements for these advances are simple and easy to meet in Mumbai too. You only need to make sure that you meet all the lender requirements accurately. Further, here are some smart tips that can help you secure a collateral-free business loan in Mumbai.
5 Easy Tips to Avail an Unsecured Business Loan in Mumbai:
1. Conduct careful research about available lending institutions:
Before taking any step towards business borrowing, make sure that you have collected the necessary information regarding the financial market and its available offers. To do so, you must research well about the available lending institutions in Mumbai and the business loan offers that they extend.
Check out the top features that these lenders offer along with the business loan without collateral to make a wise borrowing decision. It should help you narrow down some of the best borrowing options available in the market to choose from. While sorting, take care to keep in mind the interest rate and charges applicable on them so you find the loan option with the lowest levy for enhanced affordability and easy repayment of the advance.
2. Check if you fulfil all eligibility requirements or not:
Another important way to prepare for availing of a personal loan in Mumbai is to ensure that you meet the common eligibility requirements laid down by lenders. Doing so shall minimize your chances of loan rejection due to an error or inadequacy in your business’s borrowing profile.
Some of the common eligibility criteria lenders ask you to fulfill include the following.
- Age between 25 and 60 years
- Individual and business credit score not less than 700
- Business must be in operation for at least 3 years and in continuation when borrowing
Apart from these, you might be asked to meet lender-specific requirements. Make sure to check with your selected lender the criteria to fulfill before applying for the advance so you are well-prepared.
3. Keep all required documents ready when applying:
In addition, you must also be ready with all the required documents when applying so that you are able to complete the paperwork unhindered. Timely completed paperwork without any error allows the loan to be processed without any hassles, thus bringing quick approval for the advance as well as disbursal.
You might be required to submit some of the following documents when applying.
- Identity proof
- Address proof
- Proof of business income
- Updated and audited financial statements
- Proof of business existence
- Operational proof
- ITR filed for the required number of years
The lender may ask you to submit additional documents if needed as per your borrowing profile.
4. Apply with a high credit score and take necessary steps for improvement:
As mentioned for the eligibility requirements, a minimum credit score of 700 is a must to avail of a business loan without collateral. While this is the minimum requirement, it is always beneficial if you hold a credit score a notch higher than the threshold. This should help with easy loan procuring.
Alongside, you can also work up on a few businesses as well as individual financial aspects for the overall improvement in this score. For instance, you can repay existing credit, avail a balanced mix of unsecured and secured loans and advances, utilize only 30% of the total available credit, and such.
It is, however, advisable to take these steps well within time, at least 6 months prior to borrowing so it reflects on your score.
5. Keep your fixed repayment liabilities low:
At last, you must also take care to keep a check on the fixed liabilities you would need to meet every month. It should be maintained at most up to 50% of your monthly income, including any new loan that you seek to avail. This keeps your repayment capacity high, helping with the easy loan approval.
Before you proceed to apply for your business loan in Mumbai, make sure that you have created a well-thought-out business plan to present to your lender. Also, identify the actual usage for your loan and keep all financial statements ready.