Non Secured Debt Financiers

Are you looking to earn high fixed returns without taking a lot of risk?

Non secured debt financiers are those lenders (individuals or institutions) who lend money without acquiring any specific assets as collateral. In other words, if the debtor defaults on loan payment, the financier has nothing to fall back upon. If such a situation arises, the non secured lender cannot reclaim any assets, he or she can only file a suit against the borrower in the court. Thus, the unsecured creditors face very high risks as compared to providers of secured loans. Since such high risks are involved, they charge high interest rates, sometimes in the range of 20% to 30%. Also, the term of the loan is generally kept shorter.

This type of non secured debt can be in the form of personal loans, where a good personal credit score of the entrepreneur is required, or in the form of unsecured working capital loans, overdraft facilities, etc. from financial institutions. To reduce the risk, sometimes these can also be structured in such a way that in case of default, the lender has the right to convert the debt into equity.

Despite high interest rates, startups often find unsecured loans very attractive. Firstly, there is no collateral required. Secondly, they have simpler documentation requirements and are easier and quicker to obtain. Thirdly, generally there is no restriction on the application of funds as long as it is utilized for business related activities. And finally, there is no imminent dilution of equity and ownership interest. However, normally there is a limit to the amount of loan that can be granted, and depends upon the borrower's credit history and reputation.

Challenges

  • To identify entrepreneurs with clean records and high credit reputation, and to stay away from unscrupulous borrowers
  • Judging the feasibility and revenue generating capacity of potential investments, well before lending
  • Failure of the startup may lead to complete erosion of capital, as the non secured loan is not backed by any collateral

Solutions

  • Providing a large in-house data base of promising business startups that wish to opt for unsecured loans
  • Providing deep insights into the credit standing of the startups as well as the promoters of the startup
  • Providing a detailed risk-return analysis of the business venture as well as an in-depth research into the company's viability and the industry trends. This helps determine the capacity of the startup to repay the financiers

Benefits

  • Our detailed reports provide a clear picture about the credit-worthiness as well as its capacity to repay, before any contract is formalized – helping reduce the chances of bad loans
  • Our services help non secured debt financiers conduct financial dealings in an unbiased and transparent environment

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