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Capital is the life-force of any business. You need capital not required for executing your day-to-day business operations. Banks and other financial institutions are there to provide you with suitable lending assistance. Unsecured business loans are those loans wherein a borrower does not require to place any personal or business assets as collateral against the loan. It is a suitable funding option for business owners, who do not want to submit any collateral against their loans. However, firms opting to obtain unsecured loans must have a good credit history. As the lending institutions provide loan with no property or assets to recover in case of default, the interest rates on unsecured loans are comparatively higher.
Unsecured loans are provided to entrepreneurs on the basis of their financial resources. These loans are granted on 5 C's of credit viz; character, capacity, capital, collateral, and conditions. A borrower's creditworthiness is assessed on these 5 C's. Character, capacity, capital, and collateral indicate the borrower's willingness to repay the loan as well as his / her repayment ability. Conditions refer to the borrower's requirement details as well as other economic factors.
Unsecured small business loans are suitable for entrepreneurs who want to obtain collateral free funding. This loan is provided to sole proprietorship firms, partnership firms as well as private limited companies. Besides, self employed individuals and professionals can also avail this loan. Also known as installment loans, these are useful for varied business requirements viz; working capital, equipment financing, business expansion, and business promotion. Many businesses also acquire unsecured loans for increasing their fixed business assets.