Business

How to Avail an Unsecured Working Capital Loan and Types of Fast Working Capital Loans

When availing of a type of Fast Working Capital Loans, there are different types of capital available for you depending on your business requirements are. A lot of these types of Capital Loans will have their own pros and cons depending upon the type of business you run and the amount of capital required by a particular entrepreneur.

We need to be aware of the part that the Unsecured Working Capital Loan are different from normal business loans in the context that a lot of them are secured and thus require a particular type of collateral for the loan to be sanctioned, it is not the case for a working capital loan. Further, these business loans are very slow as compared to Fast Working Capital Loans. Coming back to the types of Unsecured Working Capital Loan, entrepreneurs can choose from among some of the choices of Fast Working Capital Loans choices for the same are:

1. Short Term Loans

This particular type of loan is the major essence of Working Capital Loans since this particular type of loan has a fixed period for its repayment and can be repaid within a period of six to twelve months with a fixed interest rate applicable on the borrowed money. In order to obtain this particular type of loan, you need to have a good enough credit score to back up your credit requirements. This is one of the best types of Fast Working Capital Loans since they do not require a lot of documentation and paperwork and also are very fast in the context of dispersing the money being loaned out to you. In case your business needs an urgent flow of cash and also have a good credit score then this would be the best type of loan available for you.

2. Bank Overdraft

A specific bank offers the solution of Bank Overdraft to their respective Bussiness Owners Customers. This particular type of Unsecured Working Capital Loan is when your business account does not have sufficient and enough funds in order to cover expenses. Overdraft is usually provided by a bank in order to provide one with funds to cover their expenses and also fulfil their respective cash-flow demands. In order to explain this with an example, when a customer deposits a cheque for 2000 dollars to settle his accounts and when he has only 1500 dollars in his bank account. In this particular context, the Bank would extend their fast working capital loans facility to the customer and provide a Bank Overdraft facility to the respective customer and cover the additional money or the lack of after prior communication with the customer. The only disadvantage for this type of loan is that the interest rates on this particular type of loan would be relatively high as compared to the other types.

3. Accounts Receivable Loan

This particular type of loan is a very common source of credit source for a lot of businesses out there that attempts to cover the money or cost of the orders or services which have been placed. The accounts receivable loan is relatively an easy loan to obtain, especially when the business can prove that it has a purchase order which needs to be fulfilled on a quick basis. When availing of this type of loan the borrowers will have to sign and make a Promise To Pay agreement which would directly imply the fact that the borrower would for sure pay back the borrowed amount to the respective lender. The principal amount would be paid back alongside the pre-agreed rates of interest.

These are the most popular forms of unsecured working capital loan, there are other types of these capital loans also available but these three are the most common and the popular ones among businessmen.

Applying for fast working capital loans is not much of a tedious process and can be done easily without any fuss. You obviously have to fulfil certain criteria as deemed by the lenders to evaluate your risk assessment. If your business is a Sole Proprietorship, a Limited Liability Partnership or a Private Limited Company then you can easily avail an unsecured working capital loan, according to your needs. You need to be aware of the fact that applying for a loan would be much easier if your business has a good credit score and also if you have been in operation for a longer amount of time which portrays your company stability and also the ability to repay the borrowed loan. While we look at the documents required to apply for a loan you need to be aware of a fact that the needs of businesses are dynamic and there are maybe some variations in documents required. With this the documents required are:

  1. Know your Customer documents such as proof of identity, proof of age, Address Proof and so on. You can use documents such as your passport, drivers license, voter ID, Business Registration Certificate and so on.
  2. Certificates of Incorporation of your Business which includes Business Registration Certificate, Tax Certificate, Property Agreements for your place of office and so on.
  3. Latest Six Months of bank statement of your current business account.
  4. Previous details of any loans taken.

These are the basic documents required in order to apply for a particular fast working capital loan in order to get quick approval. Generally, these types of loans are sanctioned on a quick basis however, sometimes these time periods may be extended depending on the needs and the documents provided by the entrepreneur in order to avail the loan facilities.

There are a lot of avenues through which one can avail these types of loan apart from the normal banks. Nowadays there are also a lot of non banking financial institutions which provide quick approval with a good credit limit and quite less interest rates being charged by them. You can choose the providor of the loan depending on your needs and the approvals being granted to you.       

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