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Personal Loan

A guide to acquiring loans for non-listed companies

Summary: Non-listed private companies in India can secure personal loans for growth and working capital despite a lack of traditional financial documents by providing alternative papers and choosing new-age lenders who offer customised credit options.

27 Oct 2023 by Team FinFIRST

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Non-listed companies are private firms that do not publicly trade on a stock exchange. Unlike large, listed corporations, non-listed companies often face challenges in securing loans from banks and other private loan lenders. Lenders have limited financial data to assess credit risk for private companies. However, non-listed firms can still get funding by opting for personal loans for their business. This article explores how non-listed companies in India can secure business loans for growth.

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How does taking a Personal Loan affect your credit score?

Personal Loan on Aadhar Card

Challenges faced by non-listed firms in securing business loans.

The key challenges non-listed companies face in availing business loans are:

No publicly available financial records – One of the primary differences between a listed and an unlisted company is that there are no published profit/loss statements, shareholder reports, or stock filings publicly available of unlisted companies that banks can analyse.
Limited credit information – As they are privately held, non-listed firms do not have a credit rating that indicates their ability to repay loans.
Higher perceived risk – With limited financial insights, lenders view non-listed companies as riskier and may be reluctant to lend.
Need for collateral – Banks often insist on 100% collateral for approving business loans for non-listed firms.
Constraints on loan amount – Lack of data on cash flows and assets restricts the loan amount sanctioned.

An alternative to business loans: Personal loans

While it may get a bit tricky for non-listed companies to avail a traditional business loan, an alternative is applying for a instant personal loan. Personal loans have easier eligibility criteria and require fewer documents, which makes it simpler to access funds through this financing option to meet your business needs. Some of the documents that you can submit to avail a personal loan for your business include:

ITRs – Minimum 2 years’ business income tax returns indicating steady revenues.
Audited financial statements – Income statements and balance sheets for the last 2-3 years if available.
KYC documents – Business registration proof, GST certificate, TAN, etc.
Bank statements – Statements of business current account for 6-12 months reflecting cash flows.
Order books – Purchase orders/agreements validating recurring business contracts.
Projections – Revenue/profitability projections, business plans supporting loan repayment, etc.

Having a credit rating by agencies like ICRA, CARE, and CRISIL indicates financial discipline and enhances loan eligibility. It builds confidence in banks and private loan lenders who can then benchmark your firm against industry averages.

Tips for availing a personal loan for your business

Building a relationship with the lender

Approaching your existing bankers like current account providers can help secure loans faster. Banks already have your KYC and transaction data and can gauge repayment capacity. Developing long-term relationships with lenders instead of one-time interactions eases financing.

Exploring secured loan options

For new or risky non-listed ventures, banks prefer collateral to hedge risks. Pledging assets like property, equipment, or fixed deposits can help boost eligibility and the approved loan amount. Secured loans also tend to have lower interest rates than unsecured loans or lines of credit. But remember to provide collateral worth higher than the loan amount sought.

Associating credible guarantors

Involving associates, promoters, or directors with a high net worth and credit scores as loan guarantors lends credence. Their willingness to co-apply indicates confidence in your venture’s growth prospects and assurance of repayment.

Building credit history

Non-listed companies should build robust credit histories to increase future loan approvals. Measures like timely vendor payments, avoiding loan defaults, controlled debt use, and showing disciplined financial behaviour improves credit profile.

Maintaining high capital cushions

Having large capital reserves, cash buffers, or liquid assets strengthens the case for funding to lenders. It depicts financial stability to sustain business shocks and repay loans despite the vulnerabilities of being non-listed.

Grow and expand your business with a personal loan

A personal loan can allow non-listed companies to unlock funding for growth capital, working capital needs, equipment purchases, or expansion. Choose the right lending partners, and with a Personal Loan balance transfer, you can optimize the use of funds for your business efficiently.

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Metra Trust or its affiliates to any licensing or registration requirements. Metra Trust shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.

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