Business Loan From NBFCs vs others - Which Is Better?
You can get business loan from banks & non-banking financial companies. Read on to know the difference between NBFCs & others business loan which will help you to choose wisely!
Companies have relied extensively on traditional banks for business loans. However, Non-Banking Financial Companies (NBFCs) have transformed drastically and changed the face of lending in India. NBFCs now run neck to neck with traditional banks with low business loan interest rates. Like the two sides of a coin, each has its pros and cons.
This article highlights the difference between NBFCs and others for business loans in detail:
1. Eligibility Criteria
Generally, banks have a stringent lending criterion for approving a business loan. The process includes strict verification and towering documentation to sanction the loan amount. Banks also seek a higher credit rate, business experience, and annual turnover. The whole process can be tedious and takes a lot of time and energy from the borrower.
Comparatively, NBFCs have fewer approval procedures for loan applications. They follow a seamless approach to providing their customers with the required financing. It is easier for one to qualify for the loan hassle-free with a low credit score and little business experience through an NBFC.
2. Interest RatesThe joy of funding carries the burden of interest payments. Higher interest rates result in a higher EMI burden. NBFCs offer low business loan interest rates compared to traditional banks. This feature reduces the pressure on business owners while availing the loan.
Interest rates charged by NBFCs can be low as they are set according to the Prime Rate (PLR), which is not Reserve Bank of India (RBI) regulated. Therefore, they enjoy greater flexibility and changed interest rates on business loans to attract more customers.
Additionally, the loan processing fees and other fees charged by NBFC are lower than traditional banks.
3. Digital Loan Disbursal ProcessThe new-age digital world leaves little space for hard copy and physical documentation. Most NBFCs offer 100% paperless business loans using digital platforms.
Business owners do not have to leave their homes or offices to seek funding from these fintech companies. You must simply visit the financial company's website or download the app on your smartphone and apply for an online business loan. You can upload a copy of the required documents, and they will send the money to your bank account within 24 hours once approved.
On the contrary, most banks still follow the traditional method, and the borrower must provide a paper copy of the document and physically witness the branch for confirmation. This process takes excess time and effort which you would otherwise have spent on your business.
4. A Pre-Approved Loan LimitSeveral NBFCs in India offer pre-approved credit-restricted business loans. It is important to note that interest is only calculated based on the amount withdrawn by the entrepreneur, not the entire credit line available to the entrepreneur.
Such regulations help businesses keep EMI low, resulting in further savings. In addition, pre-approved credit restrictions allow companies to reapply for business credit when needed, especially if they run out of cash.
Apply For A Business Loan With IIFL FinanceIIFL Finance is a leading business loan provider. Since its inception three decades ago, it has helped several business owners have a hassle-free experience. IIFL Finance offers quick and low business loan interest rates that are perfect for MSMEs with small financial requirements up to INR 30 lakh.
We ensure you focus on your business operations more than the hassle of funds. The entire process, from application to disbursement, is 100% online.
Frequently Asked Questions
Q.1: Is applying for business loans easier with NBFCs?
Ans: Yes, getting a loan from an NBFC is much easier than from a bank. They have more relaxed prerequisites and documentation to provide a loan. Anyone can get a business loan from an NBFC.
Q.2: What are the benefits of applying for a business loan from an NBFC?
Ans: NBFCs have a less stringent policy for business loan disbursal. A person with a low credit score can get a loan from an NBFC as well.