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Learn How to Get Collateral-free Loans for Your Start-up

Raising funds for a business is the most primary concern for all entrepreneurs and when in the case of a startup, it is given the utmost priority. And to make it straight, every business needs funds; it formulates the business plan especially for the startups.

Most of the startups in India are seeing the limelight these days. They have a lot of opportunities coming ahead of them and they are also the primary profit makers if they utilize their products and branding correctly.

Start-ups will be either following the below two options:

  • Service Sector Enterprise: These sectors of the services are offering or supplying the services. Their works will involve only on a service attitude for clients who are in need of workforce for other services. Since most of the product manufacturers are capable of creating the product alone. They might not be able to do any other jobs like making calls and answering the customers. Hence they hire a company who can provide them with these services.
  • Manufacturing Sector Enterprise: The manufacturers are the creators of a product and those who are handling the maintenance of the stocks, import or exporting the stocks to other countries etc. They involve in the work related to the production of the goods and maintaining the numbers of the goods. Some of them will take a step and involve in the marketing segments whereas others will be dependent on the service providers for customer management.

And the banks are offering loans as per the startups requirements; they will give the startups an array of option to choose the best one suitable for them. Below are the two types of collateral-free loans for start-ups offered by the banks, financial institutions as well as the government:

Terms Loans:
            Loans with a longer term that can be repaid within a period of one year to ten years’ time after obtaining them are classified as the term loans. These funds are normally used by the startups to enhance their business growth, to stage their new project launches and to expand their companies’ branches. It is done along with the purchase of any machinery equipment which can be used to develop their products. Packaging the products in the right way is also very important these days, and the startups are very strict in buying their packaging machinery as well.

Companies which are doing construction services can also avail these term loans since the building costs involves a lot of money and it will be useful for the longer run. Similarly, constructing the interior designs of the office is also very vital these days since the startups have to attract their clients as well as the employees to work for them.   

Working Capital Loans:

These loans can be classified in two divisions and that is fund-based and non-fund based. One who borrows these loans has to pay it back within one year of time from obtaining it. This loan will be difficult for the startup-s who is looking for a mega budget for their companies. But it will be useful if you want a small amount like expanding your branches, hiring more employees etc. Since the profit from these options are not 100 per cent. You can drop these plans after seeing the result for a year and then decide upon buying another loan or not. It basically depends on the risk factor of the expansion of your company. You have to calculate these things perfectly, so that you will face a financial loss later in your business. And the other common requirements for these sort of loans are payment of rent for the building you work, inventory stock up etc.

Features of start-up loans:

Before borrowing any kind of loan, you have to do a thorough research on the features and benefits of the loan you opting for. You also have to compare it lenders to choose the loan plan suitable for you. Please find below some of the advantages of collateral-free loans for start-ups:

  • You need not to pledge any collateral for the loan
  • Youmust be a registered citizen of India
  • Repayment period for these sorts of loans are flexible and convenient
  • Documentation required is very less
  • Loan amount willbe directly credited to the applicant’s bank account
  • Applicant must be between 21 and 65 years of age
  • A possible and practical business plan should be formulated

Documents Required for Start-Up Loan

The documentation process is very important in the case of start-ups. The lenders will scrutinize the loan application and see whether you are trustworthy and will repay the loan on time. Hence if you don’t submit the proper document you might face a rejection in your loan. Applicants must submit the following documents for the approval of the loan:

  • Bank Account Details along with the signatures verified by the bank
  • Business Plan
  • Two passport-size photographs of the applicant
  • Address and Identity Proof
  • Age and Income Proof

Procedure for Start-Up Loan Procurement

Obtaining a loan for your business has become very simple and easy nowadays. You just have to apply with the required documents online and the lender will contact you in return if your application is eligible for the loan. And if they don’t contact you also, you have a lot of other lenders who is waiting to offer you a loan.

Applicants can apply for most of the schemes available for business loans online, however in some cases, the documents and forms have to be submitted as hard copies to the respective bank or the lending institution. To make sure that you submit the necessary documents and get approval for your business loan, you have to follow the below steps:

  • Login to the official website or bank/institution for obtaining the forms
  • Enter your details in the forms without making any mistakes
  • Collect all the required documents in the format prescribed by the lender
  • Upload the documents online and submit the application
  • Documents and application forms can also be physically submitted at the nearest branch of the lender or the financial institution from which you are borrowing the loan amount.
  • The lender will verify the details and documents attached

After the loan gets approved, the applied loan amount will be directly credited to the applicant’s bank account in a maximum of 2-3 days of time.

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