Why You Need Collateral Free Loan For Working Capital

Why You Need Collateral Free Loan For Working Capital

Finance is the most essential factor for every business owner. Either she invests her money or burrows from the various formal and informal institutions mediating the financial transactions. 

The most prefered option is applying for a loan that a majority of entrepreneurs look for when it comes to investing in their small businesses. 

But is it worth putting your assets at someone’s door just to avail the loan? Does everyone who wants to start a business have to possess property so that he or she can use it as collateral for availing the loan? Perhaps, no! 

It is always good to avail the loans for your working capital, which is collateral-free. 

Therefore, we have brought you the underlying reasons for availing a collateral-free loan for working capital.

Once you are convinced why you need collateral-free loans for working capital, you will have the clarity and direction for availing of such loans only.

If you wish to get a collateral-free loan you may reach out to this link.

But, before moving on to the benefits of availing collateral-free loans for working capital, let us first understand a few basics of these terms.

Let’s get started!

WHAT IS A COLLATERAL-FREE LOAN?

The loans which do not require any backing of a guarantor or an asset, or any security deposit, are referred to as collateral-free loans.

Collateral free loan is an unsecured loan. Such business loans are unsecured and consider the current income of the person, inflow of cash and viability of the business to ensure that he or she can repay the loan timely.

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Talking about Collateral, it is an asset which has a definite financial value against which one can borrow money from any financial institution. These assets are pledged to avail the loan for moving assets of the person such as real estate, land, machinery, shares & stocks, vehicles, etc. 

If you fail to repay the loan amount, the lender reserves the right to take permanent custody of the pledged asset and sell it to recover the unpaid loan amount.

Whereas Collateral free loans do not need the business owners to pledge any of their assets and provide the complete flexibility and peace to avail the loan for your working capital. One can avail Collateral Free loans for both personal and business purposes. 

Wishing to avail a collateral-free loan for your working capital?

Click on the link.

WHAT IS WORKING CAPITAL?

Working capital is an indicator of an organisation’s short-term financial health and operational efficiency.

If a company’s current assets are less than or equal to its current liabilities, then it may have difficulty growing or paying back creditors.

There are high chances that the organisation may even go bankrupt.

Formula to calculate the working capital of a company 

Working Capital = Current Assets – Current Liabilities

When a working capital calculation is positive, this implies that the current assets of the business are greater than its current liabilities. This also implies that the business has more than enough resources to cover its short-term debt, and it has residual cash in terms of current assets to be liquidated to pay this debt.

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When a working capital calculation is negative, then it implies that the current assets of the business are not enough to pay for all of its current liabilities. The short-term debt of the company is more than its short-term resources. Negative working capital also implies the following:

  • Poor short-term health,
  • Low liquidity, 
  • Potential problems in paying its debt obligations as they become due.

ADVANTAGES OF COLLATERAL-FREE LOAN

Collateral-free loan for setting up any new business helps businesses get operational as it provides the funds for the working capital, equipment, furniture, décor, marketing, paying salaries, leasing premises, digitising the business, and the like.

Talking about the advantage of a collateral-free loan, then the major benefit of a collateral-free loan is the fact that there is no requirement for any security

Some of the other benefits include:

  • The loans are given at a minimal and subsidised rate of interest.
  • Flexible repayment of the loan with a tenure of up to 5 years.
  • Availability of Letter of Credit and bill discounting up to 180 days.
  • The credit history is not required at the time of availing the loan.
  • Hassle-free application processing.

Final Words

In case you are wishing to obtain a Collateral free loan for your working capital, you can reach out to the following link.

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