How to Achieve Business Growth to Scale with Unsecured Business Loans?

June 26, 2025

For many businesses, especially MSMEs and startups, it’s not the lack of ideas that holds them back- it’s about having the right resources at the right time. And when we talk about resources, capital tops the list. As per the Times of India article, the demand for unsecured business loans from MSMEs in India has seen over 70% year-on-year growth, with smaller cities leading this rise. That’s a strong signal that businesses are turning to collateral-free financing to meet growing needs.

At BC Shetty & Co., we help businesses navigate the complexities of these loans by offering strategic advice that ensures compliance, transparency, and smart financial decisions.

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What Are Unsecured Business Loans?

An unsecured business loan is a loan offered without requiring any collateral. That means, as a business owner, you don’t need to pledge any property or asset to secure the funds. The loan is approved based on your business's credit profile, revenue trends, and repayment history.

For growing companies, especially MSMEs and startups, this is a huge advantage. You get access to working capital without putting personal or business assets at risk. These loans also typically involve quick approvals and flexible repayment options, making them ideal for achieving business growth.

Unsecured vs Secured Loans: What’s the Key Difference?

Secured loans are backed by collateral, such as property, machinery, or receivables. This lowers the risk for the lender and usually results in a lower interest rate. But not every business can afford to offer security.

Unsecured loans don’t require collateral. They rely purely on your business’s performance and creditworthiness. The speed, flexibility, and ease of access make them a smart option for those aiming to scale without delay.

How Unsecured Loans Can Fuel Your Business Growth

Here are six practical ways these loans can help your business grow:

1. Bridge Immediate Capital Gaps

Sometimes, all your business needs is quick cash. Whether it’s for buying raw materials, paying vendors, or managing a one-time operational cost, unsecured loans provide fast access to funds. There are no usage restrictions, so you’re free to use the money where it's needed most.

2. Expand Without Collateral Stress

Want to open a new branch or enter a new market? These loans let you do that without tying up property or equipment. That’s a big plus, especially for businesses without heavy assets, yet with strong ambitions for expansion.

3. Upgrade Technology and Infrastructure.

Modern businesses need modern tools. From cloud software to new machinery, an unsecured loan allows you to invest in upgrades that improve efficiency and support startup growth and scale.

4. Strengthen Hiring and Team Building

Scaling up means hiring more people. But onboarding skilled professionals can be expensive. With accessible funds, you can comfortably expand your team, build specialised roles, and improve operations.

5. Maintain Business Continuity

Cash flow hiccups happen. Late client payments or off-season dips can strain daily operations. With a reliable credit line in place, you can continue running the business smoothly while waiting for receivables.

6. Improve Your Credit Profile

Timely repayments on unsecured loans improve your business’s credit score. This builds trust with future lenders and opens doors for bigger credit opportunities at better interest rates.

Types of Unsecured Business Loans

Before applying, it helps to know what kind of loan fits your needs best:

• Term Loans: Fixed amount, fixed tenure, often used for long-term projects.
• Working Capital Loans: Ideal for short-term operational needs.
• Overdraft Facility: Credit extended beyond your account balance, useful for short-term cash gaps.
• Merchant Cash Advance (MCA): Repayments linked to your daily card sales.
• Business Credit Cards: Revolving credit with flexibility for small to medium expenses.
• Bill Discounting: Convert your unpaid invoices into instant cash by selling them to a lender at a discounted rate. It’s a smart way to ease liquidity pressure without adding debt or waiting 30–90 days for customer payments.

Terms typically range from 12 to 60 months. Keep in mind that interest rates for unsecured loans are generally higher than secured ones, often between 14% and 24%, depending on the lender and your credit history.

Which Banks Offer These Loans, And at What Rates?

Here’s a quick look at where you can actually apply for these loans and what interest rates you can expect:

Private Banks

• HDFC Bank: ~14.50% to 24%
• ICICI Bank: ~15% to 22%
• Kotak Mahindra Bank: ~16% to 23%
• IndusInd Bank: ~14% to 20%

Public Sector Banks

• SBI (State Bank of India): ~12.65% to 16.25%
• Bank of Baroda: ~12.70% to 17.25%
• Punjab National Bank (PNB): ~13% to 17%
• Canara Bank: ~12.50% to 16.50%

Note: Interest rates are of per annum and vary depending on your business profile, tenure, and repayment capacity.

Eligibility Criteria for Unsecured Business Loans

Wondering if your business qualifies? Here’s what most lenders look for:

• Business should be at least 1–3 years old
• Annual turnover must fall between Rs. 10 lakhs and Rs. 40 lakhs
• Credit score of 700 or above is recommended
• Business entity can be a Proprietorship, Partnership, LLP, or Private Ltd.
• Key documents: Bank statements, GST returns, ITR filings, and business registration proof

A Quick Note on CGTMSE

For eligible MSMEs, the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) offers government-backed credit guarantees on collateral-free loans.

Here’s what makes CGTMSE beneficial:

• Collateral-free loans with no third-party guarantees
• Covers up to 75% of the defaulted loan amount
• Loan limit of up to Rs. 5 crore
• Support available through registered banks and NBFCs

If you’re an MSME, make sure to check if your loan is eligible under the CGTMSE scheme. It significantly improves your chances of approval.

What About Personal Guarantee and Legal Structure?

Most unsecured business loans require a personal guarantee, which means your personal assets may be at risk if your business defaults. To limit this exposure, it is wise to operate under a Private Limited Company or an LLP. These structures offer better protection by separating personal and business liabilities.

Why Bring Chartered Accountants into the Picture?

Because taking a loan is just step one. Making sure it doesn’t come back to bite you? That’s where we step in. Here’s what we help you with:

• Making sure you follow the rules under Sections 185 and 186 of the Companies Act
• Showing the loan properly in your financial statements
• Handling interest correctly when it comes to taxes
• Keeping all documents in order so there’s no confusion later
• Avoiding any issues during audits or reviews

At BC Shetty & Co., we provide professional guidance on structuring, accounting, and legal compliance around unsecured borrowings. As trusted chartered accountants in Bangalore, we help businesses manage debt smartly and sustainably.

Final Thoughts

If you’re looking to scale business growth, unsecured business loans can offer you the freedom and flexibility to move fast. But speed alone isn’t enough. The key is in smart planning, professional guidance, and compliance-first execution.

Need help figuring out the best way to fund your next move? Let’s talk.