Having a brilliant idea for a startup is not enough. One of the biggest challenges entrepreneurs face is the lack of funding or capital to turn their idea into reality. Taking a business loan then becomes a viable option for them.
However, most new startups do not have assets such as property or shares to offer as collateral to get a loan from a bank or NBFC. However, this does not mean they cannot get a loan. Entrepreneurs can get a loan even without collateral.
There are a few things they can do to improve their chances, though. Here’s how to get a startup business loan without collateral:
Improve your credit score
If you want to get a startup business loan, you will need to have a decent credit score. A score of 750 and above is considered healthy and greatly improves your chances of getting a business loan approved, as well as negotiating lower interest rates. You can do so by using your credit cards to pay your bills, settling your dues in full before the due date, avoid taking too much credit at a time and not closing unused credit cards, among other things.
Clear other pending debts
If you are repaying multiple loans at the same time, chances are a new loan request by you will be denied. For example, if you already are repaying a car loan and a home loan, lenders will be less inclined to service a loan for business, as they would not be confident in your ability to pay back the money on time.
Create a strong business plan
You need to make a strong case for your business plan to get a business loan without collateral. You must present a comprehensive plan that describes your idea, market opportunity, process, financial projections, and more. This helps instill confidence in lenders; they note that you have done your research, which helps create a positive impression.
Thoroughly evaluate requirement
Ask for only as much as you need. Though you may want to get your hands on as much capital as you can to give flight to your ambitious plans, think about how you plan to repay a big amount. Estimate right and apply for a loan that you can service. Asking for a huge amount without justifying the need is a sure way to have your application rejected.
Take an unsecured business loan
Taking an unsecured loan is the easiest way to finance business because they are easy to get and require no collateral. Keeping in mind the challenges a startup has to face, Tata Capital offers customized, hassle-free, unsecured business loans to fledgling businesses. The easy and swift application process, coupled with a higher threshold for eligibility, starting at Rs 5 lakh and going all the way up to Rs 75 lakh to supplement any and every business need. You can service the loan via stress-free, structured business loan EMI options. This means you can stop worrying about finance and focus on growing your business.