A small business generally embarks on its journey through investments from angel investors or venture capitalists. As its business matures, it may aspire to borrow more money not only to keep the enterprise operational, but also to explore new horizons.
Such a small business can approach banks and other traditional non-banking finance companies (NBFC) to procure business loans. However, these institutions follow a prolonged process for loan approval and prefer providing small business loans only against collateral. Most small businesses that are still in their growth phase do not have sufficient collateral to get secured business loans, and so their only avenue for business funding is an unsecured business loan.
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