Unsecured Business Loans in Singapore
While thinking of starting a business or growing it, the primary concern is funding. Unsecured business loans are a great way to induce working capital in any business. Let’s learn more about it reading further on this page.
When no collateral security or asset, personal or business, is provided against the loan funding, it’s referred to as Unsecured Business Loan. For example, as a credit card sets a limit of funds to be used and repaid monthly, similarly such facility is available for business establishments as well but in a different manner, which is called the line of credit.
These loans are granted on the basis of credit score, financial statements and current debt position, condition of business, cash flow forecast and overall relationship with the Banking Institution. The interest rate of unsecured business loans is higher than secured loans as it involves more risk comparatively.
The unsecured business loan’s interest rate is usually around 8-13% p.a., while government financing schemes bear interest of about 7% – 9% p.a.
Benefits of Unsecured Business Loan
- Easy Accessibility – It’s easy to acquire unsecured business funding with strong credit scores, as the application process can be done online. All that is required is a good internet connection and a computer or mobile.
- No Collateral Required – In unsecured business loans, there is no need for collateral security provision. It is a major benefit for small and medium enterprises those are just looking to increase their sales or inventory.
- Faster disbursal of loans – As mentioned earlier, the process is majorly online, with no physical verification of assets involved, and hence, the approval process is quicker.
- Lesser Documentation – In comparison to secured business loans, the documentation of unsecured loans is relatively less.
Core Purpose of Acquiring Unsecured Business Loans
- Building Business Credit: Unsecured business loans foster a higher credit score. Many commercial and trading organizations increase their credibility by repaying small working capital loans in order to maintain a better score for a large capital funding.
- Expansion: Growth and expansion are essential to any business. There are times when we need to infuse some capital for new product launch, renovation or relocation of business premises for improving existing profitability. These expenses are easily met with unsecured business loans.
- Seasonal Sales Fluctuations: Flexibility to maintain inventory, purchase raw material and other financial requirements during low cash transactions period, the business requires funding. This small business funding need is commonly met by unsecured business loans.
- Business Acquisition: At the time of striking a deal, we need to pay a lump sum deposit to the seller. Unsecured loan comes in handy at this stage for its quick and speedy disbursal.
Key Considerations while applying for an Unsecured Business Loan
- Ensure a good credit score: Credit score is your capacity to pay back the borrowed amount. It is best to check the company’s liabilities and income sources before applying for this loan.
- Current amount of debt and cash flow situation: Liquidity available is the best indicator of loan required.
- Age of business: There is a significant difference in determining interest rates of startups and mature institutions.
- Type of Industry: Whether its an FMCG or Pharmaceutical company, the distinction in their working and nature also determines the Loan provided.
Various Kinds Of Unsecured Business Loan Options
- Term Loan or Installment Loan: In this loan, a lump sum of money is granted to company which it repays in fixed regular installments. Interest on these loans is charged throughout the time of loan. Many times, term length is between 1-25 years.
- Short Term Loan: This is similar to term loans, with the only difference being its term period. This loan is provided to company in a lump sum which it repays at regular intervals or installments, over a short period of time. The term is usually between 3-18 months.
- Lines of Credit: A certain amount of money limit is set to lend to a business by banks or other financial institution. As and when some amount of money is borrowed from that limit, the same amount is to be paid as a principal with interest.
- Merchant Cash Advance: It’s given by a financial institution to a business with bulk credit and debit card sales. A cash loan is advanced in favor of business in exchange for a percentage of daily debit and credit card sales and additional fee.
Thus, you can apply for a hassle-free Unsecured Business Loan online from Finaxar and reap the benefits of increased creditworthiness and profitability. For further details contact us.