Opting for an instant business loan has gotten all the way easier in recent years. The main reason for it is that a lot of loan lenders are available in the market. They have a fast loan application process and offer business loans at comparatively easy terms and conditions.
Many borrowers saw traditional lenders, such as banks and informal sectors as the only sources of credit. But the market is now occupied with FinTech companies such as NBFCs and Online Lending Companies. NBFCs are not banks, but they provide credit facilities.
Non-Banking Financial Companies (NBFCs)
Banks and NBFCs both have different regulations. Banks are regulated under the Reserve Bank of India, and the NBFCs are regulated as per the Companies Act, 1956. NBFCs are generally divided into three types, namely loan companies, asset companies, and investment companies.
When decided to avail a loan for business, MSMEs generally find themselves in dilemma to choose between a bank and an NBFC. However, recent trends show that Micro, Small, and Medium Enterprises have inclined towards NBFCs because of their flexible and fast loan disbursement process. Let’s take a look, why?
Easy Loan Process
Banks have strict rules and regulations when it comes to sanctioning a business loan. However, NBFCs have easy criteria. Their approval and disbursement process is smoother and quicker. Also, their process is less complicated, and generally, the loan amount is disbursed within a few working days. Moreover, individuals who require an instant business loan generally avail loan from NBFCs.
Holistic Credit Evaluation Process
Unlike banks, NBFCs do not depend on the credit or CIBIL score of an individual only. They have their credit evaluation system which evaluates the creditworthiness of the borrower holistically. The NBFCs consider the business industry, vintage, bank statements, turnover, and ITR filed in the previous year to assess the credibility of the borrower.
Competitive Interest Rates
NBFCs have very competitive interest rates. They provide loans at par or less than the banks, mostly. Additionally, some NBFCs like ZipLoan do not even charge any prepayment charges after the payment of 6 EMIs. Therefore, borrowers find it affordable to avail an instant business loan from NBFCs.
Business Loan Eligibility
NBFCs have relaxed or straightforward eligibility to sanction an MSME loan. They also have customer-friendly terms and conditions that allow more business owners to have access to formal credit. Also, they offer unsecured business loans, which means there is no need to offer collateral to avail a small business loan.
Owing to changes in financial lending in the last decade, NBFCs have emerged as significant lenders in the loan market. They act as a key driver in meeting the financial needs of business owners in a way that banks have failed to do.