Regular and timely fund infusion at different points of time is vital for the growth of a business. This especially holds for a small business that is yet to get established and generate significant revenues. Thus, to augment the limited promoter funding, unsecured business finance comes in handy to fund business operations. Such loans, besides the right timing and prompt processing also have several other benefits as follows:
- Collateral free finance
The best part is that fintech companies extend collateral free unsecured, short term business loans. Hence there is no charge on any of the business assets which are completely protected even in the event of a loan default. This is a big relief to small business units that are gradually building their asset pool and are not in a position to offer an array of assets as collateral.
- Smoothens liquidity position
Adequacy of cash as a measure of liquidity to carry out essential business operations is the most critical aspect of a business. A business loan from a fintech player has several advantages in this respect over that of a bank. NBFCs extend short term unsecured business loans with digital processing and speedy disbursement timelines. This helps meet any urgent cash expenditure in the short run. The interest rates are competitive which helps in saving on financing costs. The fintech lender is in a position to offer unsecured business loan at attractive rates owing to passing on the cost savings from technology to the borrower. Further, there is no collateral cover required, so the business assets of the small business are protected. Fintech lenders do not mandate any profit-sharing arrangement. Thus, unlike venture capitalists and angel investors, one need not dilute the equity component of the business or part with the valuable profits. The profits can be fruitfully reinvested back into the business to grow the business further.
- Prompt loan approvals
Time is of the essence, when it comes to financing. Fintech companies with their flexible lending practices and adoption of cutting-edge technology are in a position to offer speedy loan approvals within 3-5 days to small business units. The digital loan process is highly simplified and involves the following steps:
- Online application via the website or mobile application or through an impanelled agent
- Evaluation of the application and online communication of the decision
- Sanction of loan amount by direct credit to the registered bank account
The customer-friendly documentation process of online upload is followed up with prompt loan disbursal to borrowers. For loan amounts less than Rs 10 lakhs, the sanction is almost instant on uploading the relevant documents.
- Customized loan solutions
Every business has unique business needs. It cannot be painted with a single brush. Fintech lenders offer tailor-made business loans to suit the specific needs of a small business from a minimum of Rs 1 lakh to as high as Rs 1 crore with varying tenures from 6 months to 36 months. There is considerable flexibility as regards the repayment structuring with a monthly or quarterly frequency. Further, the business loans may be extended even to those entities that have faced loan rejection from banks.
4- Attractive interest rates
Fintech lenders offer lower rates compared to unorganized moneylenders and banks. This is because the savings from the adoption of technology are passed on to the borrower. The interest rates vary between products and range from 18-24% on reducing the rate of interest.
Hence it is best to avail a small business loan from a fintech lender. The business loans can be applied to diverse business purposes ranging from balance transfer, loan consolidation, working capital loan, office, commercial unit or branch expansion and any other business expansion plans. The lenders would not interfere or monitor the utilization of the loan amount so long as it is applied for business purposes.