{"id":3917,"date":"2020-12-02T14:50:38","date_gmt":"2020-12-02T09:20:38","guid":{"rendered":"https:\/\/razorpay.com\/learn\/?p=3917"},"modified":"2023-08-11T14:32:32","modified_gmt":"2023-08-11T09:02:32","slug":"collateral-free-loans-for-businesses-sme-capital","status":"publish","type":"post","link":"https:\/\/razorpay.com\/learn\/business-banking\/collateral-free-loans-for-businesses-sme-capital\/","title":{"rendered":"Collateral Free Loans are Changing the Game for SMEs"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">Collateral free loans are growing exceedingly popular, especially after the COVID-19 outbreak. Unlike before, these unsecured loans offer reasonable interest rates and flexible repayment options.\u00a0<\/span><\/p>\r\n<p><span style=\"font-weight: 400;\">According to a survey, nearly 70% of Indian businesses have applied for collateral free loans this year.\u00a0<\/span> <span style=\"font-weight: 400;\">Let\u2019s understand why.\u00a0<\/span><\/p>\r\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_80 counter-hierarchy ez-toc-counter ez-toc-transparent ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69e064b81b706\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69e064b81b706\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/collateral-free-loans-for-businesses-sme-capital\/#What-is-a-collateral-free-loan\" >What is a collateral free loan<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/collateral-free-loans-for-businesses-sme-capital\/#The-need-for-collateral-free-loans\" >The need for collateral free loans<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/collateral-free-loans-for-businesses-sme-capital\/#Benefits-of-collateral-free-loans\" >Benefits of collateral free loans<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/collateral-free-loans-for-businesses-sme-capital\/#How-Razorpay-is-helping-businesses\" >How Razorpay is helping businesses<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/collateral-free-loans-for-businesses-sme-capital\/#Razorpay-Capital\" >Razorpay Capital<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/collateral-free-loans-for-businesses-sme-capital\/#Working-Capital-Loans\" >Working Capital Loans<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/collateral-free-loans-for-businesses-sme-capital\/#Cash-Advance\" >Cash Advance<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/collateral-free-loans-for-businesses-sme-capital\/#Line-of-Credit\" >Line of Credit\u00a0<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"What-is-a-collateral-free-loan\"><\/span><span style=\"font-weight: 400;\">What is a collateral free loan<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\r\n<p><span style=\"font-weight: 400;\">A collateral free loan is provided by a bank or a fintech body to the borrower without any guarantee or pledge. <\/span><span style=\"font-weight: 400;\">In simple terms, this means, a business can approach a lender and borrow money from them at a certain rate of interest even without collateral.<\/span><\/p>\r\n<blockquote><span style=\"font-weight: 400;\">A \u2018collateral\u2019 is an asset or a valuable item one pledges against taking a loan. On repaying the loan, the collateral is repossessed. And, if the borrower fails to repay the loan, the collateral is retained by the lender.<\/span><\/blockquote>\r\n<h2><span class=\"ez-toc-section\" id=\"The-need-for-collateral-free-loans\"><\/span><span style=\"font-weight: 400;\">The need for collateral free loans<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\r\n<p><span style=\"font-weight: 400;\">Considering the evolving needs of businesses, we can say that the traditional banking models are significantly behind. Many small and medium sized businesses that apply for loans don\u2019t pass the eligibility criteria. <\/span><\/p>\r\n<p><span style=\"font-weight: 400;\">This has created somewhat of a gap in the overall experience for businesses that have to borrow from banks.<\/span><\/p>\r\n<p><span style=\"font-weight: 400;\">Banks need collaterals to vet these businesses, which at that point in time, businesses simply can\u2019t afford. Loans also take prolonged periods to get approved. The fate of a business can depend on loan approval time, too.\u00a0<\/span><\/p>\r\n<p><span style=\"font-weight: 400;\">This ends up creating a lot of unnecessary anxiety for borrowing businesses. This is exactly when they turn towards other lenders that provide instant working capital.<\/span> <span style=\"font-weight: 400;\">Collateral free loans are mostly required by business owners or entrepreneurs of SMEs.<\/span><\/p>\r\n<p><span style=\"font-weight: 400;\">The pandemic knocked out a lot of SMEs, putting their efforts of revival on hold. But, all is not lost yet. Collateral free loans are helping these businesses get back on track.\u00a0<\/span><\/p>\r\n<h2><span class=\"ez-toc-section\" id=\"Benefits-of-collateral-free-loans\"><\/span><span style=\"font-weight: 400;\">Benefits of collateral free loans<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\r\n<p>&nbsp;<\/p>\r\n<div style=\"text-align: center;\"><a style=\"border-radius: 3px; background: #528ff0; padding: 15px; font-weight: 600; cursor: pointer; text-decoration: none; color: white;\" href=\"https:\/\/razorpay.com\/capital\/working-capital-loans\/?utm_source=Content&amp;utm_medium=Blog&amp;utm_campaign=Collateral+Free+Loans+are+Changing+the+Game+for+SMEs\" target=\"_blank\" rel=\"noopener noreferrer\">Get a collateral-free working capital loan<\/a><\/div>\r\n<p>&nbsp;<\/p>\r\n<p><span style=\"font-weight: 400;\">Collateral free loans are especially beneficial to businesses that lack the credit score, and not eligible for loans through traditional lenders.\u00a0<\/span><\/p>\r\n<p><span style=\"font-weight: 400;\">Some of the major benefits include,<\/span><\/p>\r\n<ul>\r\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">No collateral or third party guarantee needed<\/span><\/li>\r\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Attractive and competitive rates of interest<\/span><\/li>\r\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Flexible repayment tenures and options<\/span><\/li>\r\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Quick and hassle-free processing of applications, since approvals are done automatically by the credit decisioning system<\/span><\/li>\r\n<\/ul>\r\n<h2><span class=\"ez-toc-section\" id=\"How-Razorpay-is-helping-businesses\"><\/span><span style=\"font-weight: 400;\">How Razorpay is helping businesses<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\r\n<p><span style=\"font-weight: 400;\">Razorpay understands where businesses need help and bridges the gap between what a business expects and what banks offer.<\/span><\/p>\r\n<h3><span class=\"ez-toc-section\" id=\"Razorpay-Capital\"><\/span><span style=\"font-weight: 400;\">Razorpay Capital<\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\r\n<p><a href=\"https:\/\/razorpay.com\/capital\/\"><span style=\"font-weight: 400;\">Razorpay Capital<\/span><\/a><span style=\"font-weight: 400;\"> offers loans for businesses without collateral, at competitive rates. Businesses no longer have to wait long periods of time for loans to get approved. Since the whole loan application process is online, the turnaround time is very short.\u00a0<\/span><\/p>\r\n<p><span style=\"font-weight: 400;\">Loan repayments are very flexible too! Businesses can choose to pay in instalments on a daily, weekly, or monthly basis.\u00a0\u00a0<\/span><\/p>\r\n<h3><span class=\"ez-toc-section\" id=\"Working-Capital-Loans\"><\/span><span style=\"font-weight: 400;\">Working Capital Loans<br \/><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\r\n<p>Now you can get collateral-free business loans in a day\u2019s time. <a href=\"https:\/\/razorpay.com\/blog\/business-banking\/working-capital-loan-small-business\/\">Razorpay Working Capital Loan<\/a> is designed to meet the short-term working capital requirements of MSMEs such as salaries, infrastructure overheads, procurement of raw materials and much more. Razorpay has built this non-collateral based financing process to revamp the traditional processes and bridge the MSME credit demand-supply gap.\u00a0<\/p>\r\n<div style=\"text-align: center;\"><a style=\"border-radius: 3px; background: #528ff0; padding: 15px; font-weight: 600; cursor: pointer; text-decoration: none; color: white;\" href=\"https:\/\/razorpay.com\/capital\/working-capital-loans\/?utm_source=Content&amp;utm_medium=Blog&amp;utm_campaign=Collateral+Free+Loans+are+Changing+the+Game+for+SMEs\" target=\"_blank\" rel=\"noopener noreferrer\">Get Working Capital Loan<\/a><\/div>\r\n<p>&nbsp;<\/p>\r\n<h3><span class=\"ez-toc-section\" id=\"Cash-Advance\"><\/span><span style=\"font-weight: 400;\">Cash Advance<\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\r\n<p><a href=\"https:\/\/razorpay.com\/blog\/business-banking\/razorpay-line-of-credit-cash-advance-msmes\/\"><span style=\"font-weight: 400;\">Razorpay <\/span><span style=\"font-weight: 400;\">Cash Advance<\/span><\/a><span style=\"font-weight: 400;\"> offers the convenience of an unsecured loan to manage cash requirements prior to customer payments. Businesses can withdraw cash up to their credit limit, repay when customers pay and borrow again when they need more funds.<\/span><\/p>\r\n<p><span style=\"font-weight: 400;\">Razorpay\u2019s Alternative Credit Decisioning System pre-approves businesses based on their past customer transactions. They can pay interest only on the amount for the duration of the withdrawal. Businesses can also repay their loans automatically through settlements.<\/span><\/p>\r\n<div style=\"text-align: center;\"><a style=\"border-radius: 3px; background: #528ff0; padding: 15px; font-weight: 600; cursor: pointer; text-decoration: none; color: white;\" href=\"https:\/\/razorpay.com\/capital\/cash-advance\/?utm_source=Content&amp;utm_medium=Blog&amp;utm_campaign=Collateral+Free+Loans+are+Changing+the+Game+for+SMEs\" target=\"_blank\" rel=\"noopener noreferrer\">Get Cash Advance<\/a><\/div>\r\n<p>&nbsp;<\/p>\r\n<h3><span class=\"ez-toc-section\" id=\"Line-of-Credit\"><\/span><span style=\"font-weight: 400;\">Line of Credit\u00a0<\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\r\n<p><a href=\"https:\/\/razorpay.com\/blog\/business-banking\/introducing-razorpay-line-of-credit\/\">Razorpay Line of Credit<\/a>\u00a0makes it convenient for your business to get instant access to an unsecured line of credit and manage your cash requirements at all times, especially when faced with an unexpected demand.<\/p>\r\n<p>Here are a few benefits you can enjoy with Razorpay Line of Credit:<\/p>\r\n<ul>\r\n<li>Line set up in just 2 business days with 24*7 cash withdrawals<\/li>\r\n<li>No collateral. No hidden charges. No pre closure fees<\/li>\r\n<li>Interest rates starting at 1.5% per month<\/li>\r\n<li>Pay only on what you use &amp; save on interest by repaying early<br \/>For example: If you withdraw INR 100,000 at 1.5% and repay in 20 days, you pay only INR 1000 as interest<\/li>\r\n<li>Get 100% flexibility &amp; repay in easy EMIs or manually from Line of credit dashboard; use your line again without a new application for every withdrawal.<\/li>\r\n<\/ul>\r\n\r\n<div style=\"text-align: center;\"><a style=\"border-radius: 3px; background: #528ff0; padding: 15px; font-weight: 600; cursor: pointer; text-decoration: none; color: white;\" href=\"https:\/\/razorpay.com\/x\/line-of-credit\/?utm_source=Content&amp;utm_medium=Blog&amp;utm_campaign=Collateral+Free+Loans+are+Changing+the+Game+for+SMEs\" target=\"_blank\" rel=\"noopener noreferrer\">Get Line of Credit <\/a><\/div>\r\n<p>&nbsp;<\/p>\r\n","protected":false},"excerpt":{"rendered":"<p>Collateral free loans help you grow your business with their competitive interest rates and flexible repayment options. Read on to learn more.<\/p>\n","protected":false},"author":151156458,"featured_media":3918,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3437,3643],"tags":[],"class_list":{"0":"post-3917","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-banking","8":"category-capital"},"_links":{"self":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts\/3917","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/users\/151156458"}],"replies":[{"embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/comments?post=3917"}],"version-history":[{"count":8,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts\/3917\/revisions"}],"predecessor-version":[{"id":8625,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts\/3917\/revisions\/8625"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/media\/3918"}],"wp:attachment":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/media?parent=3917"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/categories?post=3917"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/tags?post=3917"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}