Yes, there are business loans that can be availed without any collateral. Running a successful enterprise requires a lot of capital infusion. We seek loans and other forms of credit from banks from time to time to meet these financial needs.
While most business loans require you to pledge considerable collateral or guarantee to get a loan, there are a number of finance options that give you credit without any collateral.
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Government-sponsored credit schemes: The Government of India has launched various credit schemes that give collateral-free loans to businessmen. Some of them are:
These schemes give collateral-free loans to eligible and capable businessmen to meet their business needs. Some of the schemes give you loan amounts of up to Rs.1 crore without any collateral.
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Line of Credit from Banks: The line of credits given by banks are based on your receivables. The credit is issued against your receivable invoices. They come with low-interest rates and serve as a good short term credit for business use. This credit line depends on your relationship with the bank and is solely discretionary.
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Small Business Credit Cards: Most banks and NBFCs offer credit cards to small businesses. These credit cards can be used as a good backup for your expenses. You may need to have a good credit score to get these credit cards though.
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Equipment Financing: If you are looking for loans to buy machinery or equipment for your business, then this loan is suitable for you. Here, the purchased machinery serves as the collateral until the loan is repaid and hence you don’t have to submit any collateral separately to get this loan.
Points to Note:
If you are looking for a huge loan amount, collateral-free loans may not be of much help. With collateral-free loans, also called unsecured loans, the loan amount is less but the interest rate would be high. Collateral free loans serve best as short term loans that you intend to repay at the earliest.