When it comes to business loans, financial institutions want to ensure repayment in a smooth and seamless fashion. Defaults in payments make things tough for lenders by adding on to their NPAs. Most Banks/ NBFCs take into account Capacity of the applicant, Collaterals presented, Capital available, applicant’s credibility and prevailing business Conditions while assessing loan applications. However, unsecured business loans are an exception to this guiding principle where loans are disbursed in the absence of Collaterals.
As a result, companies and individuals applying for unsecured business loans need to be top-notch on all the other facets which Banks and NBFCs consider for loan approval. The obvious question that comes into the borrowers’ mind is- How can you ensure that your application for unsecured business loans is approved smoothly and conveniently? Well, the answer lies in details but it is not as complicated as some of you might perceive.
The Ideal Plan of Action for Business loan Applicants
When you apply for a business loan, your approach must be highly comprehensive. You should find out about the factors that decide the fate of business loan applications. At the same time, you must gather information about the different types of business loans and the chief points of distinction between them. It will allow you to choose the best product for your requirements.
Some research about the approval policy of different financial institutions where you are applying for business loans will also be highly beneficial. In fact, it can allow you to bridge the missing links and shortcomings in your application. So, the more you research the higher will be the chances of your application being accepted.
The fact that banks/ NBFCs approve loans without collaterals/ security means that they are taking a bigger risk. As a result, unsecured business loans are disbursed at higher rates of interest. Hence, prospective borrowers must assess whether it would be sensible to pay EMIs of greater value for the same loan amount when compared to loans with collateral.
How Do Banks Assess Unsecured Business Loan Applications?
Different Banks, NBFCs, and other financial institutions have their internal criteria for loan approval. However, some vital factors are generally considered by all lenders. These intricacies and nuances often create the line of distinction between successful and rejected applications. So, let’s take a look at some of the crucial business loan assessment parameters:
As a conclusion, we can safely say that the approval of unsecured loan applications depends on the above-mentioned parameters along with the quality of your pre-application research. We, at NDF, partner with our clients in their research and provide them with a comprehensive understanding of policies adopted by financial institutions to maximize the chances of loan approval.
Prospective borrowers having proven repayment history with well-placed key financial ratios along with desired levels of liquidity are always more likely to obtain unsecured business loans.