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Recently, NBFCs have taken a lead in providing business loans. Despite economic up-downs, they have remained the preferred choices for retail lending. And still, due to less stringent terms and procedures these non-bank financial institutions continue to hold a major share in business loan financing.
NBFCs don’t accept demand deposits but they can simply lend or make an investment. However, when it comes to taking out a business loan, maximum opt for NBFCs over banks and the reason behind this is banks have tough policies and take more time for sanctioning or approving a quick business loan. Contrarily, NBFCs make sure the processing is faster and the required amount of business loan is disbursed within a few days. Albeit interest rates are high at NBFCs maximum times in comparison with banks, borrowers still like to take out NBFC loan pondering the easy way of borrowing loan and less difficulty.
Banks and NBFCs both have different rules and regulations. Banks are regulated under the RBI, while the NBFCs are regulated as per the Companies Act, 1956. NBFCs are generally categorised into three types, namely loan companies, asset companies, and investment companies.
When MSMEs decides to avail a business loan, they usually find themselves in the dilemma to choose between a bank and an NBFC. However, based on the recent trends show that MSMEs are more inclined towards NBFCs because of their features that include more flexibility, more personalised services, and fast loan disbursement process.
1. NBFC prioritize customers
Both banks and NBFCs are service-led industries, but when it comes to providing customer-centric services, NBFCs easily outrun banks. Most often than not, borrowers are worried about interest rates and hidden charges; and they often neglect the fact that interest rates can fluctuate as they are subject to market risks. NBFCs, including HFCs (Housing Finance Companies), are systematically evolving to provide handheld customer service. The borrowers can stay up to date about loan details, payment, and extra charges for using their accounts online.
2. Fewer Rules and Regulations for Lending
Since NBFCs are under the Companies Act, lending rules and regulations are not as rigid as banks. This helps borrowers receive loans with ease. The borrowers are extremely satisfied due to the less complex loan processing.
3. Competitive Interest Rates
Interest rate is one of the primary concerns for loan seekers. And this is where the NBFCs have excelled. As compared to traditional banks, NBFCs offer competitive rates of interest on business loans. Their base interest rate is stipulated based on the prime lending rate (PLR) which is not regulated by RBI. Therefore, these Non-financial institutions enjoy greater flexibility and can vary their rates of interest in SME loans.
4. Fast Processing
Applicants need to meet the eligibility criteria set by banks, but NBFCs are compliant in this aspect. This makes the loan approval process simpler, faster, and more seamless. Maximum times, people apply for a business loan where they instantly require money. Financial institutes have considered this as a scope to fulfill the demand by fast processing the NBFC loans at a competitive interest rate. In fact, borrowers are prepared for compromising on rates of interest in case the loan amount is high and they could get the approval fast.
5. Lenient Eligibility Criteria
Contrary to banks, NBFCs follow a relaxed approach to loan eligibility. They accord the customers easier and faster financing. Despite having low credit score one can easily qualify for a loan from an NBFC. Also, lending 100% loan amount provides the NBFCs with an edge over traditional banks. Many of these financial institutions disburse the entire loan amount without requiring any collateral.
6. Holistic Credit Evaluation Process
As compared to banks, NBFCs do not just rely on the credit or CIBIL score of a business owner. They have their own credit evaluation system in place, which evaluates the creditability of the borrower on a holistic approach. The NBFCs consider the business industry, years into the same business, bank statements, turnover, and ITR filed in the 2-3 previous years to assess the creditworthiness of the borrower.
7. Minimum supporting Documents and Paperwork
NBFCs possess an incredible share of non-security small business loans. They are able to garner the attention of loan seekers due to minimal documentation and paperwork. On the other hand, Banks follow more stringent rules and regulation when it comes to paperwork. In case if a borrower fails to furnish the required documents banks may refuse to process the loan application.
Contradicting bank loans that are linked to external benchmarks, loans from NBFCs are linked to the prime lending rate. Also NBFCs have more straightforward and relaxed policies to offer the customers with low credit scores, although they come with high interest rates.
1. Fullerton India
Fullerton India is a Non-Banking Financial Company (NBFC) that offers financing solutions mainly emphasizing on Small and Medium Enterprises in India. With a network of 636 branches in India, Fullerton offers a wide range of Business Loans suitable for various business needs. Its quick processing and collateral-free offerings make it stand out from its competitors. Fullerton offers unsecured Business Loans starting from Rs. 10 Lakh and going up to Rs. 50 Lakh with attractive interest rates starting from 13 % and maximum repayment tenor of 48 months. The processing fee charged by Fullerton India is up to 6.5% of the loan amount + GST, as applicable.
Omozing helps make Smart Money Moves for a Lifetime. They strive to get lowest interest rates and best terms for your Online Applications at www.Omozing.com . We’ve made business lending smarter, faster and easier by transforming the approval process from stumbling blocks to stepping-stones. This enables borrowers to not just get access to capital, but also understand what areas they need to work on in order to enhance their credit profile. Omozing ensures that Borrowers get a secure, safe and reliable application process that be tracked online.
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3. Lendingkart Finance Ltd
Lendingkart Finance Ltd is a Non-Banking Financial Company (NBFC) providing financial solutions. They offer collateral-free Business Loan up to Rs. 1 crore within 72 hours at very attractive interest rates. The quick processing and minimum documentation offered by Lendingkart Finance Ltd makes it a viable option for many business owners.