What is Business Loan without Guarantee?

Business loan without guarantee is very similar to the business loan without collateral and security. Business loan without guarantee is provided to the self-employed professionals and self-employed non-professionals for the expansion and growth as well as to meet the day-to-day operations in a smooth way. So how to get business loan without guarantee is a million-dollar question for every entrepreneur while seeking financing for the business.

There are a lot of options to consider under business loan without guarantee but finding the appropriate method of funding for business for which it qualifies can be a different challenge. It’s important to understand the different types of business loan without guarantee that are available to the borrowers as per their profile and credentials.

What is a Guarantee for a Business Loan?

A guarantee grants the lender bank or NBFC the right to go after the personal assets in the case that the business is unable to repay a business loan. Essentially, the lender will be able to obtain the right to theresidential, commercial and industrial properties, vehicle, or other high-value assets if the loan is not repaid.

Banks often require guarantees for business loans when the company does not have a long history of operations or when the future of the business is uncertain. Obtaining a guarantee for a business loan essentially grants the bank collateral, which can make a business loan less risky for the lender.

Types of Guarantees:

Guarantees may be unlimited or limited, and it’s important to understand the difference between these two options. A limited personal guarantee is just that – it’s a guarantee that only applies to a specific amount or set of circumstances.

For example, if you’re applying for a business loan and the lender requires a personal guarantee, you may be able to negotiate a limit on the amount you’re responsible for should the business default on the loan.

On the other hand, an unlimited personal guarantee has no limitations. This means that you’re essentially on the hook for the full amount owed, regardless of the circumstances.

And remember, the lender will be able to obtain the right to your home, vehicle, or other high-value assets if the loan is not repaid.

It’s important to carefully consider the risks involved with each option before making a decision. If you’re not sure which type of personal guarantee is right for you, it’s always best to consult with a legal professional or financial advisor.

How to get Business Loan without Guarantee?

Many lenders require guarantee as a way to ensure that the borrower will be able to pay back the loan. However, there are some business loan types available for those who want to avoid a personal guarantee.

So, to get business loan without guarantee one must search for business loans with no personal guarantee by following the below mentioned these steps: 

1. The lenders in form of bank and NBFCs are to be found who provide business loans without guarantee.

2. Next, prepare a solid business plan outlining your vision, strategies, projected revenues and gather any other documents the lender you are considering may need.

3. It is very important to have creditworthiness and financial stability through various documents such as bank statements and tax returns as per the policies of the lender bank or NBFC.

4. Finally, the applicant must get prepared to negotiate with lenders to secure favourable loan terms.

It is important to evaluate each lender and their requirements before submitting the loan applications. It is best if the applicant is able to get a pre-approval without having to have a hard pull on the credit to determine the exact eligibility for funding so the personal credit score is not negatively impacted.

Who is eligible to apply and get business loan without Guarantee?

A business person who may be a self-employed professional or self-employed non-professional must fulfill the below mentioned parameters to become eligible for placing an application for business loan without guarantee:

• The loan applicant must be at least 23 years of age at the time of application and should not be more than 70 years at the time of completion of the loan tenure.
• The business should be in operation for 3 complete years.
• The income tax return filings for the business should have been done for 2 years.
• The bank accounts from where the business transactions are done must be 1 year old.
• Any one situation among the residential address or business place address should be an ownership or parental property.
• The credit score and credit track record should be as per the parameter of the selected lending company.

What are the basic features of Business Loan without Guarantee?

Every bank, NBFC and fintech company have different criteria and features for their unsecured business loan without guarantee. Here are some common features of these loans which are found:

• Business loan without guarantee is offered without any guarantee of collateral and security.
• These loans are given on the basis of the creditworthiness and repayment history of the applicant. Other necessary criteria are also be considered by the lender bank, NBFC or fintech company as per their internal policies.
• In most cases, banks and NBFCs require that the said business be in operation for at least 3 complete years with profit whereas there are certain fintech companies which provide unsecured business loan quickly based on credit worthiness, credit score, repayment track record and average bank balance with at least complete 1 year of business operation.
• The loan amount can vary from Rs. 10,000 and go up to Rs. 1 crore, depending on the business size and requirement of the applicant.
• The tenure of the business loan without guarantee is usually flexible and can range from 1 to 5 years, or more in some cases.

Government Initiated Business Loan Without Guarantee Schemes For Startups & MSMES In India

Start-up enterprises, business owners, retailers, traders, manufacturers, SMEs, MSMEs, private companies, public companies, large enterprises, and partnership firms can apply for an unsecured business loan under various Government initiated business loan without guarantee schemes under which small business owners can avail  business loan without guarantee at a comparatively lower rate of interest.

These schemes include Mudra loan (PMMY), Stand-up India, Start-up Scheme, Prime Minister Employment Generation Program (PMEGP), Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), SIDBI’s Loans in 59 minutes, etc.

Read more:

• How to get Business Loan with low CIBIL score?
• How to get Business Loan without collateral?