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. 

According to a survey, nearly 70% of Indian businesses have applied for collateral free loans this year.  Let’s understand why. 

What is a collateral free loan

A collateral free loan is provided by a bank or a fintech body to the borrower without any guarantee or pledge. 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.

A ‘collateral’ 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.

The need for collateral free loans

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’t pass the eligibility criteria.

This has created somewhat of a gap in the overall experience for businesses that have to borrow from banks.

Banks need collaterals to vet these businesses, which at that point in time, businesses simply can’t afford. Loans also take prolonged periods to get approved. The fate of a business can depend on loan approval time, too. 

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. Collateral free loans are mostly required by business owners or entrepreneurs of SMEs.

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. 

Benefits of collateral free loans


Collateral free loans are especially beneficial to businesses that lack the credit score, and not eligible for loans through traditional lenders. 

Some of the major benefits include,

  • No collateral or third party guarantee needed
  • Attractive and competitive rates of interest
  • Flexible repayment tenures and options
  • Quick and hassle-free processing of applications, since approvals are done automatically by the credit decisioning system

How Razorpay is helping businesses

Razorpay understands where businesses need help and bridges the gap between what a business expects and what banks offer.

Razorpay Capital

Razorpay Capital 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. 

Loan repayments are very flexible too! Businesses can choose to pay in instalments on a daily, weekly, or monthly basis.  

Cash Advance

Razorpay Cash Advance offers the convenience of an unsecured line of credit 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.

Razorpay’s 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.

RazorpayX Corporate Credit Cards

Businesses can also avail an instantly approved card that offers superior expense management. RazorpayX offers immense flexibility with limited-term credit periods. 

These cards can be used to make payments towards Google Ads, AWS, Facebook Ads, and so much more. They are equipped with dynamic credit limits, auto-repayment features, and a whole array of curated benefits. 

Get working capital instantly for your business growth and automate your business banking with Razorpay!




Harshitha is a marketer at the future-forward RazorpayX. She has an insatiable love for travel and culture, rock music, and the work of Neil Gaiman.

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