Perks of Taking a Collateral-Free Business Loan - Loan Trivia

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Thursday, 20 December 2018

Perks of Taking a Collateral-Free Business Loan

It is no secret that SMEs have to depend on external sources of funding to run their businesses because they have limited cash reserves. However, approaching a lender to avail a business loan often leaves them disappointed. That’s when a collateral-free business loan comes in. However, before taking the said credit facility, you must be aware of the various advantages mentioned below.

Positive working cycle: A Working capital is an essential element for the effective functioning of the business. A good business is probably the one with a positive working capital which is determined by the formula: (Working Capital = Current Assets - Current Liabilities). A positive WC means the business has enough funds to manage their operational expenses and they are unlikely to take a loan. On the other hand, a negative WC indicates a deficiency in funds leading to problems in operations. Therefore, maintaining a positive working capital is much more than essential and a collateral-free business loan can help you do that.

Growth funding: Businesses have to take calculated risks on timely basis and devise business expansion and growth plans to boost the income graph. The same would require sufficient funding which can be acquired through collateral free loans

Flexibility of Purpose: One of the biggest advantages of collateral-free business loans is the end usage flexibility a.k.a flexibility of purpose. This feature allows the businesses or the borrowers to use the loan as per their need without mentioning the same to the lender. Thanks to this feature, you can use the borrowed capital:-

  • Equipment/asset purchase
  • Vendor financing
  • Line of credit
  • Merchant cash advance  

So, no matter what the nature of the business requirement is, SMEs can expand their business through unsecured business loans.

Read Also: How Collateral-free Business Loans Helping in SME Growth

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