Is it really a good idea to take Unsecured
Business Loan?

Well, answer to that lies into how sensible you are to your finances. I have seen several borrowers in my life who don’t care what interest they pay as far as they get the desired loan amount. There are people who pay 24% and 30% annual rate of interest because they are dependent on easy money.

But, hey, how wise it is? If you ask me, it is a financial crime to raise money at this kind of rates, even if your business can afford these rates. And there is a reason why I say so. Over last 20 years, Unsecured Business Loans have helped the business community because they had limited scope to raise quick money without security. So, even if the rates were high, it was okay to raise this kind of money once in a while, just to capture some market opportunity, which can generate much more returns than interest what you pay. But the times have changed.

Very few people know that there are good number of Government Banks who provide Government Guaranteed Loans at much cheaper rates.

Here is the comparison. I am sure, it will open your eyes!

As one can clearly see from the above table, CGTMSE Backed Loans are way better than Unsecured Loans in most parameters. In our experience, the CGT MSE loans are at least 7-10% more cost effective than taking Unsecured Loans. Not only that CGT Loans are cost effective, there is one more advantage. Because of the nature of unsecured loans, it is given in smaller amounts, say 20-30 Lakhs maximum. So, when the client wants to borrow 1-2 Crores, he has to apply to over 10-12 Banks who in turn give him loans of 20-30 Lakhs each and that is how he is able to gather 2 Crores on his books. But imagine, what happens to the borrower because he ends up only managing the EMIs of these 8 loans through out the month. Some coming on 3rd, some on 5th, some on 10th, some on 15th. How can he focus on business, when there is a constant worry about several EMIs coming on different dates. His entire cashflow management goes for a toss. Besides this, he ends up paying almost 7.20 Lakhs of monthly EMIs, which means that in a year almost 85-90 Lakhs is sucked out of the system leaving the business cash strapped…

So the best solution to curb this situation is to raise the low cost collateral free loans under CGTMSE…and save a fortune !