Do Banks Give Business Loans Without Collateral?

If you are running a successful business, you may be in need of more capital infusion. At these times, you will depend on bank loans and other forms of credit to meet the financial requirements. What if you can’t provide any collateral as a guarantee to avail loans from the banks? Several financial institutions provide small business loans and other forms of credits without any collateral. But, you have to remember that collateral-free loans serve best as short term loans that you intend to repay at the earliest. This is because the loan amount is less and the interest rate would be high for collateral-free loans.Now, take a look at the finance options you have.

1. Credit Schemes Sponsored by Government of India

The Government of India has launched various credit schemes that give collateral-free loans to eligible and capable businessmen. Some of these credit schemes can give loan amounts up to Rs. 1 crore as business loans without any collateral. They are:

• MUDRA Loan from Pradhan Mantri Mudra Yojana - Loan amounts from Rs. 50000 to Rs. 10 lakh can be availed using this scheme.
• Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) - A maximum of Rs. 1 crore can be availed by both new and existing enterprises.
• NABARD - Small industries in rural areas and startup business loans can avail loans under this scheme.
• Bank Credit Facilitation Scheme - MSMEs can get loans for developing their businesses through this scheme.
• Coir Udyami Yojana scheme - Up to Rs. 10 lakh can be availed as loan to set up coir units across India.
• Standup India Scheme - Under this scheme, SC/ST and women entrepreneurs can apply for loans starting from Rs. 10 lakh to Rs. 1 crore.

 

1. Line of Credit from Banks

Many banking and non-banking institutions provide financial help in the form of Line of Credit. In case your startup is facing difficulties in financial management, this facility is helpful. This credit line is completely discretionary and totally depends on your relationship with the bank. Rather than taking the full amount offered by a loan scheme, you can take only that amount of loan which is required for your business now. So, instead of charging on the full loan, the bank will only charge the interest on the loan amount used in the business.

1. Small Business Credit Cards

Various financial institutions offer credit cards that can act like a small business loan. If you are having a good CIBIL score then you can apply for business credit cards. They ask for very few business loan documents compared to others. These credit cards can be used as a good backup for your expenses. These cards have some unique features that can help you in cost-cutting. You can save a lot of money that can be used later on, in business expansion.

1. Equipment Financing

If you are looking for loans to buy machinery or equipment for your business, then this loan is suitable for you. Without paying the full amount, you can use the machinery or equipment financing to set up the equipment needed and start manufacturing the products. Until the loan is repaid, the purchased machinery serves as the collateral. So, you don’t have to submit any collateral separately to get this loan. You can clear the debt of the machinery, once the business starts generating profits. You can get this facility if you have a good relationship with the lender.

1. External Fundings

 If your business is a startup with an innovative idea, there are some private lenders and businessmen who can lend money or fund your business. If your idea is unique then you can ask these private lenders for loans. The rate of interest might be high in this case, but they’ll not ask for the business vintage period or collaterals. The need for business loan documents will be much less complicated here. This can act as a startup business loan as well.  This is a partnered post.