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How can you get business loans for small business?

Are you planning to start a small business and require funds for it or do you require additional financial support for expansion of your already existing small business? Rather than borrowing from friends or relatives or using up your savings, you can apply for a business loan. Business loans for small business are a convenient and fast process of getting funds in an emergency. You have options of getting a loan with or without collateral or mortgaging an asset with the lender. Read on to know about the two types of loans in detail and how they can be beneficial for you.

There are two types of loans and you may opt for any one of them, after going through the features:

  • Loan against property

You can apply for a loan against property (LAP) as a solution to your fund requirements. It is a secured loan that you can get against fully constructed, residential or commercial properties. Apart from business requirements, you can utilise this loan for your personal needs like medical expenses, children’s education, etc.  You can transfer an existing loan to another bank or financial institution if you find that they are having better terms and conditions compared to your existing lender. The features and benefits of loan against property include:

  • Disbursal of funds against an asset

This is a secured loan for which you have to put up a self-owned residential or commercial property as collateral with your lender. The amount of loan that you will get depends on the lender’s policies. Usually, the lenders would disburse an amount equal to a significant percentage of the market value of your collateral.

  • Low interest rates

This loan usually comes with low interest rates as you have kept an asset as security with the lender. If you default on the repayment, the lender has the right to claim ownership on your asset. He can use it, sell it off or lease it to recover the funds that are due. For this reason, he charges a low interest rate on it as he does not face a high risk related to non-repayment.

  • Type of property

You can get loan against a residential property owned by you or even a rented residential property, a commercial property or plot of land. For jointly owned property, all the co-owners beside you have to be co-applicants of the loan. The lender will not provide loan on agricultural lands or lands which have not been approved by the government.

  • A collateral free loan for business

This is an unsecured business loan as you are not offering any asset as collateral or security to the lender. It is convenient as you can get this loan even if you do not have any personal asset. The features and benefits of this category of loans include:

  • Fast processing of loan applications

Usually, the lenders process the loan applications quickly as they do not have to evaluate any asset and if you are eligible, they would approve the loan amount within a short period of time. Also, the loan amount is not limited by the value of any asset as you are not providing any collateral.

  • Unsecured business loans interest rate

The lenders generally charge an interest rate on these loans that is slightly higher than that on secured loans. This is because you are not providing any guarantee of repayment.

  • No risk of loss of assets

You are not keeping any collateral while applying for unsecured business loans for small business, so there is no risk of losing your asset if you are not able to repay back the loan amount. If you just need to provide a proof that you have a steady income or earning and a good credit worthiness and excellent financial history of the business.

You may require additional funds urgently for your small business needs either during its initiation or during various points of time while you are running it. During these circumstances, you can apply for loans without any asset or by keeping a mortgage with the lender. These two types of business loans for small business have separate loan terms and conditions but would support you with adequate funds that you can repay back comfortably within a time period suitable for you.

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