NBFCs (Non-Banking Financial Companies have come up as a great option for a lender over traditional banks when it comes to a business loan. Nowadays, when NPAs (Non-Performing Assets) is on a steep rise in the Indian economy, getting a small business loan for your micro, small, or medium-sized enterprise is a huge and complex task. Well, it is also a frustrating task as well.
Firstly, banks don’s sanctioned business loans without collateral. Secondly, even if you have all the business loan documents at the place and even good CIBIL score, the traditional lenders – banks tend to make you sweat a lot for loans for business. And then there come NBFCs to your rescue. They offer a business loan with no security at minimal documentation and basic eligibility criteria.
Banks have a variety of products, such as home loans, personal loans, business loans, etc. But, NBFCs mostly deal with small and medium-scale enterprises and offer small business loans.
Throughout the country, there are many MSMEs (Micro, Small, and Medium Enterprises) with good prospects that cannot keep up with new technologies coming up every day (mostly due to insufficient funds). Hence, they fail to sustain their business or survive in the market.
NBFCs can be the way out for these enterprises as they offer collateral-free business loans. Besides, the unsecured business loan, they provide term loans, machinery loans, working capital loans, and Flexi loans as well.
Why Choose NBFCs over Banks?
Unsecured Loans are generally offered by NBFCs & Not Banks
Business Loans (from 1-5 lakhs) can be availed from NBFCs without putting up any collateral (Mortgage or security deposits etc.) against the loan amount. This is the single most reason which has led to a revolutionary rise in the growth of NBFCs in a country like India, where most of the MSMEs cannot afford to offer collateral for business loans. Notably, banks fail to provide unsecured loans. In our country, where small business owners find it difficult to run their business, it is extremely difficult for them to hypothecate security.
Sanctioning of Loans is an easier process in NBFCs
While approving business loans, banks are comparatively very complex and stringent. They take a long time to verify and approve business loan applications. However, the loan processing of NBFCs is much faster and easier.
Instead of the huge paperwork and verification (like in banks), NBFCs provide options for online document submission and verification. The number of documents required by them is limited to just five, which can be submitted online. You can click their picture or get them scanned. The verification will be done online. Next, you can literally sit anywhere and sign your business loan agreement. Once you are through with the verification, the loan amount gets transferred to your account for use within a few working days. Notably, NBFC business loans are fast as well.
Affordable Interest Rates On Business Loans in NBFCs
While banks have very high-interest rates along with collateral requirements, NBFCs offer loan at a very reasonable rate even if they don’t seek any asset as collateral. This makes the loan not just fast but affordable as well.
Minimal Regulatory Rules in NBFCs
Banks with their strict, complex, and numerous rules and regulations related to business loans tend to scare off potential borrowers. Many prospering MSMEs in genuine need of money end up wasting time without even getting the required funds to run the show. This can lead to their business struggling even for survival.
Whereas, as stated earlier, due to minimal document requirement and straightforward & clear set rules, NBFCs tend to be the better choice.
NBFCs sanction Business Loans to Enterprises with even Average Credit Scores
While banks drill down real hard on enterprises with low CIBIL or Credit score, NBFCs evaluate an enterprise beyond just a credit score for a business loan sanction. So even if you have an average credit score, do not lose hope and take a chance, which might help grow your business to new heights. Also, some NBFCs have their evaluation system wherein they check the creditworthiness of the borrower themselves, in addition to the CIBIL score.
Steps to Apply for an NBFC Business Loan
- Go to the official website or download the mobile app of your selected NBFC.
- Apply for the loan online by submitting the required information. The entire process is online – fill the loan application online.
- Submit all the necessary documents as stated on the website. Typically they would be the following:
- PAN Card
- Last 9 months’ bank statement
- Last 2-3 years’ ITR
- Office and residential address proof
- Identity proof
- After successful submission and evaluation of the aforesaid documents, you will get your business loan amount for use in your bank account within a span of 3-5 business days.
Yes, it’s that easy to get an unsecured loan for your business! There are many options available in the market for getting a business loan. Doing thorough research and keeping a clean credit score are the best ways to look for an option most suitable for your scenario. Though there are many financial institutions in the market offering loans at lucrative rates, do remember to read between the lines!
