NBFCs Vs Traditional Banks
It is quite understandable for business owners to depend on traditional banks. Since few businesses can survive unpredictable economic cycles and overcome difficulties without getting a business loan. In addition, people looking for business loans from traditional banks to expand their operations and expand their businesses.
Due to their tight lending guidelines, traditional banks are unable to lend to the majority of small businesses. As a result, they find it difficult to meet their working capital requirements. However, since Non-Banking Financial Corporations (NBFCs) began to appear on the Indian market, things have drastically changed. NBFCs these days are also offering payroll financing for businesses that need to secure their employees’ salaries.
Let’s look at the advantages of obtaining an unsecured business loan from an NBFC
- Eligibility Requirements
The simplicity of the eligibility requirements is the main advantage of non-banking financial services over banks. Before making business loans, banks frequently have tight criteria. They follow a strict verification process when approving requests for business loans and demand a lot of supporting documentation.
The eligibility requirements for NBFCs, in contrast, are more lax and flexible when approving loan requests from businesses. They take a lax approach to ensure that their customers can easily obtain financing. One can still easily qualify for an unsecured business loan from an NBFC even with bad credit and no previous business experience.
- Rates of interest
The majority of unsecured business loan application worry about the interest rates that will be applied to their loans. Increasing interest rates lead to higher EMIs, which in turn result in a bigger financial strain. NBFCs offer business loans at interest rates lower than those offered by traditional banks. It shows that business owners are not under as much pressure when they take out a loan from an NBFC.
NBFC interest rates are probably lower because they are based on the Prime Lending Rate (PLR), which is not controlled by the Reserve Bank of India. They now have more freedom and are able to alter the interest rates on their business loans in order to entice more customers.
- Digital Method
Physical documents and hard copies occupy very little space in the contemporary digital environment. With the help of internet platforms, the majority of NBFCs have started offering totally paperless business loans (4 Tips to bear in mind when applying for a business loan). By combining money and technology, they have developed into digital financial technological firms.
Through these Fintech firms, business owners can receive financing without leaving their homes or places of employment. To apply for an online business loan, they merely need to visit the lender’s website or download one of their mobile applications. They can upload digital copies of the required documents, and the funds will be transferred to their bank account within 24 hours.
- The payment of money
Bank business loans require substantial paperwork and a rigorous verification process, as was previously mentioned. NBFCs, on the other hand, abide by a little more lenient lending conditions. They require very little documentation and have lax eligibility requirements. The outcome is that their business loans are disbursed quickly. This makes it possible for business owners to easily access money when they require it.
- Loan Cap
There are several NBFCs in India that provide business loans with pre-approved lending ceilings. Business owners are permitted to withdraw funds as needed from this loan cap. It’s important to remember that only the amount used by the business owner and not the entire unsecured business loan maximum available to that person is subject to interest.