A guide to acquiring loans for non-listed companies

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. 

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.

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 utilise the personal loan funds for your business optimally.
 

Disclaimer

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