Unsecured Business Loan – Eligibility, Documents & Interest Rates, etc.

Unsecured business loans are those loans where you do not need collateral for securing loans from banks or NBFCs and are offered as businesses/ MSMEs loans.

These loans are offered based on the documents provided by the business like Credit score, income statement, ITR, etc.

Securing this loan is easy and does not need a lot of documentation. Some banks or NBFCs make this entire process fast and easy and completely online.

It is an unsecured loan hence, no collateral is required for securing the loan which makes the loan a little risky for the lender.

Due to this reason, the interest rate offered by the bank is high. In this article, we will discuss in detail the unsecured Business loan, Eligibility, Documents & Interest Rates, etc.

Unsecured Business Loan - Eligibility, Documents & Interest Rates, etc.

Eligibility for Unsecured Business Loan

The following are the eligibility criteria for applying for the unsecured business loan-

  • The individual applying for the loan must be at least 18 years of age and a maximum of 65 years of age is required.
  • The individual must have a credit score of 750 or above
  • The business must be at least 1 year old and must have been in operation at the same location for at least 1 year
  • The applicant must have a good source of income with ITR Filings
  • The last 6 months of bank statement are required to apply for the unsecured business loan

Unsecured Business Loan Interest Rates offered by the top Banks/NBFCs

The following is the list of Unsecured Business Loan Interest Rates offered by the top Banks/NBFCs-

Axis Bank14.95% – 19.20% p.a.
Bajaj Finserv9.75% – 30% p.a.
Flexiloans1% per month onwards
HDB Financial Services Ltd.Up to 36% p.a.
HDFC Bank10% – 22.50% p.a.
IDFC First Bank10.50% p.a. onwards
Indifi1.50% per month onwards
Kotak Mahindra Bank16% – 26% p.a.
Lendingkart12% – 27% p.a.
Mcapital2% per month onwards
NeoGrowth Finance19% – 24% p.a.
Tata Capital12% p.a. onwards
UGRO Capital14.90% p.a.

Types of Unsecured Business Loans

The following are the types of unsecured business loans available for the borrower to consider-

  • Term Loan: Any loan which is given to the borrower and has to be repaid within a given period is called a term loan
  • Working Capital Loan: This loan is availed by individuals who need working capital for day-to-day business operation needs
  • Government Schemes Loans: To promote business, the government provides various schemes for the individual who wants to seek a business loan like Mudra Loan, Prime Minister Employment Generation Program (PMEGP), Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), etc.
  • Business Credit Card:  business credit card is a credit card issued to meet the daily needs of the business operation to be fulfilled by the credit card

How to Apply for an Unsecured Business Loan?

There is nothing different from applying for an unsecured business loan than a secured business loan, the process is the same. The following are the steps that you’ll have to follow to apply for an Unsecured Business Loan

  • Firstly you’ll have to find the loan amount that you would need and the plan for the loan securing before the application
  • Since it is an unsecured loan, the loan amount disbursed by the bank will be the amount that the bank feels is the safe amount for repayment
  • Collect all the documents mentioned above and contact the bank that you want to apply for the loan for
  • Now, visit the shortlisted banks and fill out the application form for the loan and attach the documents file prepared and submit it
  • Your documents and application form, loan requirements, and business premises visit will be conducted along with other loan processes procedure
  • You may even be charged the loan processing fees to do that
  • After the completion of the loan processing, you will be provided with the loan offer with details like EMI tenure, amount, interest rate, etc.
  • If you like the loan offer, you can accept it by providing the e-Mandate bank which will deduct the loan amount every month from the bank account
  • After completing all these processes, you’ll receive the loan amount in your bank account and is ready to use

Documents Required for Unsecured Business Loan

The following are the documents required for an unsecured business loan-

  • Customer letter for end use/the proposed end use of BIL funds
  • OD sanction letter, wherever DP/OD limit is not mentioned in the Bank statements
  • Professional qualification certificate for professionals
  • Partnership deed, in the case of partnership firms
  • MOA/AOA along with a certificate of incorporation, in case of companies
  • Form 3CB and 3CD or Form 3CC and 3CE, wherever applicable

Comparison: Secured Loan vs Unsecured Loan

The following is the comparison between the secured loan and unsecured loan-

Loan Type / CategoryUnsecured LoanSecured Loan
Collateral/SecurityNot requiredRequired, in the form of equipment/raw materials/stock/machinery/residential or commercial properties
Interest RateComparatively higherLower as compared to unsecured loans
Loan Amountlow loan amountHigh loan amount
Processing FeeLowHigh
Repayment Tenure12 months – 5 years5 years – 30 years
Credit ScoreThoroughly checked and considered by the lenderOnly checked by the lender
Approval RateLowHigh
Loan Disbursal TimeWithin 1-2 working daysDepending on business requirements can exceed 7 – 10 working days
Pre-payment OptionsFlexibleRigid


Can I have a co-applicant for the loan application?

Yes, you can apply for the loan with a co-applicant which makes your profile stronger if your co-applicant has a solid financial background.

Is there any effect on the credit score of the co-applicant if I miss the repayment of the loan?

Yes, there will be an effect on the credit score of the co-applicant if he/she misses the repayment of the loan.

What is the minimum credit score needed to apply for a loan?

A minimum credit score of 750 or above is required for getting an unsecured loan from banks or NBFCs.

How long does it take for the unsecured business loan to disburse?

For unsecured business loans, some banks/NBFCs can take less than 3 hours to get disbursed however, some traditional banks can easily take 7-10 working days for the loan to get disbursed.