5 REASONS WHY YOU SHOULD OPT FOR A BUSINESS LOAN FROM NBFCs

Banks and non-banking financial companies (NBFCs) often have several lucrative offers in their portfolio that aim at the unique requirement of borrowers, especially SMEs. However, getting a business loan in Delhi or adequate finance for business anywhere can be an arduous task, unless you meet the required criteria.

Businesses that qualify the basic loan eligibility criteria may have to choose between a bank and an NBFC while seeking a financial loan. Though most of the services provided by NBFCs and banks are largely similar, the Indian Government and Companies Act do not allow NBFCs to offer certain services that banks are licensed to administer. Nevertheless, NBFCs continue to do better and outperform banks in terms of providing finance for business, as well as customer service and satisfaction.

The reasons clearly lie in the advantages offered by these financial institutions. Banks are stringent with paperwork and eligibility requirements while processing a loan application, as they form an integral part of the banking system regulated by the Reserve Bank of India (RBI). Credit score is also factored in, and greater acuity is required on the applicant’s part. On the other hand, NBFCs that provide finance for business are more flexible in approving and disbursing loans with a faster processing time. Some even accept low credit scores and give a business loan without security at comparatively high-interest rates.

Benefits of Business Loan in Delhi from NBFCs

Traditionally, SMEs have preferred banks over NBFCs to avail finance for business although the latter have also been in existence for a long time, largely because of the lack of awareness about alternate sources of finance. Their popularity has grown only recently due to the numerous advantages they offer. NBFCs stand as a tough competition for banks as the option of getting a loan approved from them is much easier, quicker and convenient. With the aid of technology, a new brand of NBFCs called FinTech lenders now disburse funds in as less as 3 days with minimum documentation requirement.

Let us take a detailed look at the top reasons why SMEs now increasingly prefer NBFCs over banks for sme loans

in India.

1. 1. Quick and Easy Processing

Banks widely follow a rigid application process for all SMEs requiring a business loan in Delhi. Businesses have to meet the eligibility criteria for their application to be approved, and the entire process is time-consuming, often ranging from weeks to a couple of months. NBFCs, on the other hand, are quite lenient now with new-age Fintech platforms offering seamless digital support for financing loans quickly.

Features such as minimal documentation, speedy disbursals and 24/7 availability are some of the noteworthy achievements in digital financing. SMEs now stand to gain from a major convenience of procuring finance for business online, especially when they need a business loan without security. In case of an emergency, SMEs can also opt for a loan online in fewer than five steps.

2. Competitive Interest Rates

The interest rate is generally determined by the turnover of the business, its credibility and credit history. sme loans often opt for a lower rate of interest, as the amount of (EMI) equated monthly instalment will also be much lower. In addition to moderate interest rates, NBFCs providing finance for business offer attractive benefits to SMEs when compared to banks.

For example, some present-day NBFCs may offer a reduced processing fee, a business loan without security, zero prepayment penalty or no part-time payment charges, while others may provide greater flexibility or special loan plan for senior citizens or women. With a myriad of business loan services, borrowers find NBFCs a good fit for their essential finance requiremen

1. 3. Lenient Rules and Regulations

A less stringent process is adopted by NBFCs, where the eligibility criteria for a business loan are designed to sync with the unique requirements of SMEs. This makes it easier to avail a business loan without security from NBFCs. Certain NBFCs offer customised services for long and short-term business loan requirement. Borrowers are encouraged to apply for a credit product that best fits the various phases of their business. Additional features such as repayment terms, loan tenure, or an unsecured business loan to solve cash flow problems are also taken into account.

The process is less complicated and there is a smaller chance of the loan application being rejected, which improves customer rating and satisfaction levels. NBFCs usually involve minimum documentation, and SMEs can easily secured business loans in India and receive the amount within three days following clearance of their online application process and assessment of creditworthiness.

1. 4. Collateral-Free Loan

A business loan without security extends working capital aid to an extensive variety of SMEs such as manufacturers, merchants or wholesalers. The risk perception in lending capital leads to the insistence on collaterals by banks, which may not be easily available with these firms, especially when it comes to new business ventures and micro-businesses that require small loans.

Digitally enabled NBFCs to provide business loan without security, consistently helping organisations who do not have any collateral.

5. Credit History

Credit score adversely affects the eligibility criteria, particularly for obtaining a business loan without security. A major part of loan applications for a business loan in Delhi is rejected by banks due to poor credit history. A low credit score leads to a high-risk purpose, as these businesses may not pay up their EMIs on time. For banks to consider an application, a minimum credit score of above 600-650 is a necessity, failing which SMEs are considered ineligible to obtain loans. A good score and absence of large outstanding loans can increase the creditworthiness and provide sufficient flexibility in getting a loan.

However, NBFCs compliment banks by offering customised credit products with flexible repayment schedules, particularly when it comes to a business loan without security – an option that cannot be availed through banks. NBFCs do offer business loans to SMEs with a low or a bad credit score, but charge a slightly higher interest rate.

In such cases, businesses find it easier to approach a new age NBFC that understands their needs and is able to serve them according to their immediate business requirement.

This, along with the other reasons listed above, is why SMEs should consider approaching tech-enabled NBFCs for a business loan without security.

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Ankit Shrivastva is a blogger with an experience 8 years and worked for top organisation of India.