For any business, irrespective of its size, maintaining adequate working capital is crucial. However, even the most meticulously planned financial strategy fails at times— impacting the cash flow of the business. For decades, traditional banks have been the go-to place for any financial requirements for businesses. One of the most popular types of loans opted by businesses is “Unsecured Business Loans”.
However, traditional unsecured loans are not apt for every business—especially for businesses that need quick access to working capital. Additionally, the exhaustive documentation process, high rate of interest, and time taken to get the loan approved pushed many business owners to look for alternative financing options.
Thankfully, in the last decade, several alternative lending options have emerged to help businesses with their ever-changing financial requirements. The most beneficial among these alternative lending options is “Invoice Discounting”. Before we discuss the benefits of invoice discounting, let us understand the definition and features of unsecured business loans.
Unsecured business loans are also known as no-collateral loans or business loans without security. This type of loan is usually offered based on your company’s creditworthiness, the status of your business financials, and your ability to repay the debt. It can be availed when companies require immediate working capital either for growth or daily business operations during a cash crunch.
Here are some of the popular sources of business loans without security:
There are many major differences between unsecured business loans and invoice discounting. Some of them are:
To avail invoice discounting service through KredX, a business must meet the below eligibility criteria:
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With KredX, the bill discounting process is very simple. In a nutshell, a business must generate an invoice on the date of the sale and mention the credit period (bill payable date). They must then upload the invoice copy on KredX website. Investors in the KredX pool will purchase the invoice at a discounted rate. Within 24 to 72 Hrs* from the invoice value being approved, the funds will be credited in the business account. The business receives the funds without any hassle.
Recording a discount on note receivable is a 5 step process.
Some of the goals of account receivables are as follows.