Big businesses are like big ships. They travel the oceans with ease, look majestic, and hog the limelight with their size. But even the biggest ships need smaller tug boats in the harbor. Small businesses are like those tug boats. They are called the backbone of an economy, often forming over 90% of the total number of businesses within a local economy. They deliver jobs, growth and prosperity for millions of people, and have played a crucial role in driving the global economy out of recession.In spite of that, small businesses rarely receive the public’s attention or appreciation.
In situations where it is relatively easier for large businesses to tap financial institutions for capital requirements, small businesses find themselves gasping for a breath of air. Or in their case, a business loan without collateral. When it comes to business loans, often there’s a large amount of paperwork involved and after finishing with that, at times, small enterprises still fail to meet their capital needs. And the biggest hurdle in their way is the absence of collateral. Luckily, thing are changing for the better.
The MSMED Act of 2006 that has been nothing short of a boon for small and medium enterprises. It has done more than it was meant for. The Act has given a legal fortitude to the small enterprises and enabled them to access capital required for further growth. Taking cue from the MSMED Act, most banking and financial establishments have instituted business loans without collateral for small businesses.
Be it manufacturing or services, business loans without security allow small enterprises the room to jostle past the market hurdles and grow. Almost all banks and financial institutions offer the facility of loans without security for small businesses across sectors. Riders still exist, banks can’t loan money to everyone. But there are ways to ensure eligibility of your small business for these lending instruments. Most private and public sector banks have various schemes and loan instruments for small businesses. Doing a thorough check of the banking market is always a good idea for small enterprises before choosing a loan without security. For example, most banks like ICICI, HSBC, HDFC, Bank of Baroda, IDBI, SIDBI, and non-banking financial institutions like Bajaj Finserv, Muthoot Finance, etc. have different types of business loans without security to offer. As a small business owner, you could choose between –
- Manufacturers and service providers can access collateral free business loansupto INR 1 crore (credit guarantee required)
- Traders and/or retailers can get upto INR 25 lakhloan without security
- Collateral Free Term Loans for purchase of commercial assets & business expansion needs
While most financial institutions, including banks, are likely to have their own set of requirements, certain criteria related to paperwork and eligibility remains same across the board. Ensuring that these criteria are met enables your business a quicker and hassle free access to business loan without collateral.
All new and existing Micro and Small Enterprises, both in the manufacturing and in the service sectoras defined under MSMED Act, 2006 are eligible for business loans without collateral. Most banks require these common documents to begin processing –
- Audited financials along with audited report for last 3 year
- Provisional financials for the latest 12 months ended if not covered with details of investments, loans and advances to Group Companies
- Income tax returns for past 3 years
- Sales tax returns for past 3 years
- Copy of monthly stock, age wise book debt and creditors statement for last 3 months
- Copy of last 6 months bank statement of main banker/copy of bank statement for term loan
- Duly filled up Common Application Form
- Details of all business entities where either of the promoters or direct family (spouse/children) singly or jointly hold more than 10% stake and are involved in any other business
- An undertaking duly signed by the promoters that all business entities where the promoters in their individual capacity or through their immediate relatives (spouse / children) are stake holders has been disclosed to the bank
There are a few other requirements to be fulfilled by the business while seeking loan without security from the bank.
How does MyEfiling.com help?
MyEfiling.com can assist your business right from the point of setting up your business entity, to registrations under MSMED, sales tax, income tax, etc., thus enabling your enterprise toconsider the best course of action in acquiring business loan without collateral.
We ensure that the registration formalities of your small business are done with utmost care andprofessional integrity to ensure eligibility for various government schemes for micro, small and medium scale businesses.
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