A collateral-free working capital loan is offered to the borrower with no guarantee attached. Put simply, this means that even though you have nothing to pledge against the loan, you can approach a lender and borrow money for your business needs.
Why do small businesses need a collateral-free Working Capital Loans?
Small and medium-sized businesses need funds to purchase equipment, replenish inventory, expand operations, etc. Lenders provide various types of loans curated exclusively for MSMEs and collateral-free working capital loans are one of the quickest and easiest options you can avail of collateral free
Uses of Working Capital Loans (Manufacturing, Services and Trading sectors):
- Buying raw materials/stock purchase
- Business premises renovation
- Supplier payments/general business expenses
- Product/market expansion
- Machine repair
To take advantage of collateral-free working capital loans, the borrower needs to meet specific document requirements. These include:
- Personal KYC (applicant and co-applicant) – Aadhaar Card, PAN Card and Voter ID
- Address proof: Bills such as latest bank statement, rental agreement or electricity bill.
- Finance proof: Bank statements (Personal & Business)
- Company documents: Business registration proof, GST certificate, business PAN and depending on type of business, one of the following documents may be required
– Shops & Establishment Certificate
– Trade License Certificate
– Factory Registration Certificate
– Small Scale Industries Licence (SSI)
Is applying for a collateral-free Working Capital Loan a good idea?
Businesses need to invest in their operations to grow and achieve their short- and long-term objectives. Small business owners need financial support through business loans to achieve this, but have limited options for getting a loan approved. Alternatively, some business owners choose to go through a po financing company for funding. This is a great option if your business sells consumer goods. Regardless, the key is to pick the best loan product for your needs and to fulfill all the requirements. Hence a working Capital loan is the perfect option for most small business owners to meet day-to-day requirements.
How can MSMEs benefit from collateral-free Working Capital Loans?
- Seasonal variations in cash flow are common in many businesses, requiring additional capital to prepare for a busy season or keep the business running when revenue is low. Working capital loans can keep cash flows steady during such periods.
- While waiting for payments from customers, you might need additional working capital to meet commitments to vendors and workers, which can be supplied through a working capital loan.
- Extra working capital can support your company in a number of ways, such as allowing you to take advantage of supplier discounts by buying in bulk.
- Working capital may also be used to pay for temporary workers or other project-related costs.
Why NBFCs are the support system small businesses need to grow
When small business owners apply for working capital loans, they usually receive rejections. There are a lot of papers to send, and the approval process takes a long time. There is also the possibility of rejection due to the lack of property that can be pledged as a security.
However, Non-banking Financial Companies (NBFCs) can pick up where the banks leave off and support small business owners by providing them with business loans without property collateral.
Some NBFCs provide collateral-free working capital loans to small businesses. It is of utmost importance to take a loan from a reputed and established NBFC like Kinara Capital. They have a hassle-free digital process that helps you get a loan disbursed in 24 hours. Yes, you read that right! You can get started with a 1-minute eligibility check on their website.