Women have been increasingly entering the business sector and making their presence felt. They are driving up women’s participation in the workforce and in the gross domestic product (GDP) of the nation. Even within the micro, small, and medium enterprises (MSME) sector, women are becoming more visible. They make up around 22% of all MSME entrepreneurs and have immense potential to drive growth and inclusion, but are unfortunately held back by more significant hurdles than their male counterparts, like gender bias and systemic failures. They possess the same skills and ambition as their male counterparts but often face unique financial challenges.
In the past, women business owners have struggled to access the capital they need to succeed. However, these challenges are slowly being addressed with the increasing availability of collateral-free business loans for women. This type of loan can benefit women entrepreneurs who lack the resources to provide collateral or don’t want to risk their personal assets. A collateral-free business loan can provide the necessary capital to get a business off the ground, purchase equipment, hire staff, or invest in marketing. Encouraging women entrepreneurs is important to economic development because their presence directly affects raising the standard of living, building jobs, and allowing them to be more economically independent, resulting in better performance at a societal level.
What is a Collateral-free Business Loan for Women Entrepreneurs?
A collateral-free business loan for women entrepreneurs is a financial solution designed to empower women by removing the barrier of providing physical assets as security. For women-owned businesses, this type of loan can be a game-changer, offering the necessary capital to grow and expand without the need to pledge personal property or assets. These loans are an excellent option for women entrepreneurs seeking small business loans for women, as they allow for flexible and accessible funding to boost operations, marketing, and staffing.
For those just starting their entrepreneurial journey, start-up business loans for women provide a crucial financial foundation. Women entrepreneurs’ loans are tailored to support various stages of business growth, from initial investments to scaling up. These options can provide the funding necessary to take your business to new heights.
In addition to traditional women-owned business loans, loans for women’s businesses can cater to a wide range of sectors, ensuring that women in all industries have the financial backing they need. Women entrepreneurs can also explore MSME loans for women, which are specifically designed for small and medium-sized businesses, offering tailored support to enhance their competitive edge in the market. By securing a business loan for women’s business, women entrepreneurs can focus on their vision without worrying about the constraints of collateral.
Collateral-free business loans for women entrepreneurs open doors to growth, success, and financial independence, empowering women to thrive in the business world.
How Collateral-Free Business Loans Empower Women Entrepreneurs in the MSME Sector
Collateral-free business loans are a great way for small business owners to obtain working capital without having to use their own assets as collateral. It provides an easy and convenient way to get the funds needed to expand a business, make equipment purchases, and working capital business loans. Collateral-free business loans are generally unsecured and do not require any property collateral. Therefore, MSMEs can use it to fund short-term projects or cover unexpected expenses. This makes them ideal for entrepreneurs who need more funds to cover these expenses.
Easy Availability
Women who are in the initial few years of their venture need a significant amount of funding to take their businesses to the next level. Collateral-free Business loans for women provide a great way to acquire the necessary funds to get their businesses going. However, a good credit score is a must-have. Business loans for women are usually approved based on their business plans.
MSMEs Don’t Require a Stellar Credit Score
Banks and lenders may relax the credit score requirements for MSMEs that have a solid business proposition and growth plan. Therefore, MSMEs with a great business idea can be well on their way to securing the necessary funding to make it a reality.
Easy Application and Fast Disbursal
Women entrepreneurs can easily access Collateral-free Business loans from Kinara Capital, as the process is quick and convenient. The only requirement is submitting basic documents such as business proof, KYC documents, bank account statements and financial statements. Then the loan amount will get disbursed in the applicant’s bank account within 24-hours. This makes the loan a great option for women entrepreneurs seeking financial support to grow their businesses.
Grow your MSME with collateral-free business loans
Types of Collateral-Free Business Loans Available for Women
Government Schemes: With the easy availability of collateral-free business loans, women entrepreneurs can find the financial support they need to turn their dreams into reality. The Government of India has launched several initiatives to support MSME women entrepreneurs with the aim of empowering them and boosting their development. Some examples include Mudra Loan for Women, Stand Up India, and the Udyogini Scheme. These schemes offer easy access to collateral-free loans, as well as subsidies, to support women entrepreneurs.
Loans from NBFCs (Non-Banking Financial Companies): NBFCs have been a game-changer for MSME lending, leveraging new-age technology and widespread reach to offer loans to underserved customers. Women MSME entrepreneurs can gain significantly from the services offered by these lenders, as they typically have less rigid loan criteria, easier documentation, and quicker turnaround time. Some, like Kinara Capital, even offer collateral-free loans to women with an upfront discount.
Private Lender Loans: While private lenders are an option available to women entrepreneurs, they are not an optimal one. These lenders are typically not regulated by governing bodies like the RBI, and are therefore prone to charge exorbitant interest rates and employ predatory lending and recovery practices. It’s best to opt for a registered and regulated lender instead.
Microfinance Options: Microfinance Institutions or MFIs are financial institutions that provide small loans and other financial services to low-income individuals and small businesses who lack access to traditional banking services. These can be a good option for women entrepreneurs, but they have to take the scale of their business into consideration before approaching an MFI.
How to Apply for Collateral Free Business Loan for Women?
To apply for a collateral-free business loan for women, follow these simple steps:
Step 1: Choose Your Preferred Application Mode
You can apply for a women-owned business loan through:
Online: Many lenders offer user-friendly portals where you can fill out the application form, upload documents, and track your application status.
Offline: Visit a branch or lender’s office to submit your application and documents in person.
Step 2: Check Eligibility and Loan Options
Different lenders have varying eligibility criteria. Typically, they assess factors like business tenure, annual turnover, and credit score. Explore loan options such as business loans, loans for women business owners, or specialized programs like HerVikas for women-led MSMEs.
Step 3: Gather the Required Documents
Lenders generally require the following:
- Identity Proof: Aadhaar Card, PAN Card, or Passport
- Address Proof: Utility Bill, Rent Agreement, or Property Documents
- Financial Statements: Balance Sheet, Profit & Loss Statement, and Income Tax Returns for the last two years
- Bank Statements: Typically for the previous 6-12 months
Step 4: Submit the Application
For Online Applications: Fill in the details on the lender’s website or app, upload scanned documents, and submit. Some platforms also offer instant approvals.
For Offline Applications: Visit the lender’s branch, submit physical copies of the required documents, and complete the application form.
Step 5: Verification and Approval
After submission, the lender will verify your documents and assess your creditworthiness. Upon approval, the loan amount will be disbursed directly to your business account.
Challenges Faced by Women in Availing Collateral-Free Business Loans
Despite the strides women have made in terms of entering the workforce, there are still significant socio-economic barriers that hold them back. Women entrepreneurs are often at a greater disadvantage than their male counterparts when it comes to accessing capital to start and scale their businesses.
This can be attributed to the fact that there are still gender biases and systemic hurdles keeping them from accessing formal financing. To begin with, there is a lack of awareness and accessibility to formal financing channels for women MSME entrepreneurs. The issue is further exacerbated by the fact that many traditional lenders require property collateral to issue business loans, which many women entrepreneurs don’t have. They also lack established credit histories, which keeps them from availing loans.
These multiple barriers, combined with the fact that digital savviness and access is also relatively limited for women in India relative to men, keep thousands of women entrepreneurs from accessing much-needed capital. Collateral-free business loans can be the perfect solution to this issue, but there is a need for greater awareness, digital accessibility, and strong customer support to guide them through the process.
Conclusion
Collateral-free business loans are the easiest to acquire. These loans open unlimited opportunities for MSME businesses to grow. Small businesses have several advantages, especially for women. Some of the advantages include being a role model for young women, increasing a family’s income, providing employment to the community, and many more. Female entrepreneurs can contribute to economic growth in developing countries and clearly represent an untouched potential. Most women do not get a share in their family property, making it difficult for them to get a loan. Therefore, collateral-free loans become the best option for them.
Kinara Capital is a last-mile lending firm that strongly believes in empowering women and supporting them in every possible way. To help women entrepreneurs fulfill their dreams, Kinara has designed a special loan product just for them. The HerVikas program provides an upfront discount on business loans to women-owned MSMEs without the need for any additional documentation. The HerVikas program also offers additional benefits like a 2-month repayment holiday to help women entrepreneurs manage their cash flow in the initial phase of business growth. Kinara has reduced the processing fees by 50%, making it easier and more affordable to access capital. HerVikas has also expanded its eligibility to include women-led MSME startups, further opening the doors for ambitious women who are just starting out.
FAQs
1. How can women qualify for a collateral-free business loan?
Traditionally, women have had trouble qualifying for business loans as they often lack the necessary collateral or credit history to be approved by traditional lenders. However, with new-age NBFCs implementing alternative credit decision models, they can qualify for a collateral-free business loan if their business is registered and meets the eligibility criteria set by the lender.
2. What are the advantages of collateral-free loans for women entrepreneurs?
Collateral-free loans provide a major advantage for women entrepreneurs as they enable them to access formal financing without the need to own and provide collateral, which is often challenging for them.
3. Are there any government schemes for collateral-free business loans for women?
The Pradhan Mantri Mudra Yojana and Stand Up India are examples of government schemes that women entrepreneurs can tap into in order to get collateral-free financing for their businesses.
4. What is the maximum amount of collateral-free business loan a woman can get?
The maximum loan amount a woman entrepreneur can get depends on the lender’s regulations. For instance, Kinara Capital provides collateral-free business loans in the range of Rs. 1 lakh-30 lakhs.
5. Can I get a collateral-free business loan if I have no credit history?
Yes, it’s possible to get a collateral-free business loan without a credit history. New-age fintech NBFCs cater to new-to-credit customers. For instance, Kinara Capital offers business loans to newly registered businesses owned by women entrepreneurs.
6. What is the interest rate on a collateral-free business loan for women?
The interest rate for collateral-free business loans for women varies from lender to lender.
7. Can I apply for a collateral-free business loan online?
Yes, NBFCs like Kinara Capital offer an end-to-end digital application process. You can apply for a collateral-free business loan from Kinara through the myKinara App.
8. How long does it take for the approval and disbursal of a collateral-free business loan for women?
The turnaround time for loan approval and disbursement varies from lender to lender. In the case of Kinara Capital, you can get your business loan in just 24-hours.
