NBFCs stand for non-banking finance companies. Business prefers NBFCs for availing funds
because of the flexible loan terms and less stringent eligibility criteria. Also, because of the different
kinds of loans offered by NBFCs, it allows business owners to choose a loan fitting their needs and purpose.
Here is a quick guide telling you about the must-knows while taking a business loan from NBFC companies. It can help you find
the right lender and get all approvals in time, allowing you to focus on your business plans.
The last few years have viewed a significant transformation in the way that non-banking financial companies
(NBFC) function in India. Businesses have welcomed NBFC loan companies with open arms as they make the
process of acquiring loans relatively hassle-free. Apart from contributing to the financial system, NBFCs
also play their role in accelerating the infrastructural development as well as generating employment. A
recent Financial Stability Report from RBI stated that when comparing NBFCs Vs Bank NBFCs perform
better than banks and are increasingly contributing more and more to the Indian economic growth.
Features Of NBFC Loan Finance In India
Where the existing banking institutions fail to cater to the need of growing small-scale enterprises, the
need for a business loan from NBFC arises. The given points explain how the prospect of business loans from
NBFC in India is changing the situation of businesses for the better.
1. Relaxed Lending Norms:
Over the years, several micro, small, and medium enterprises (MSMEs) have emerged in the Indian economy.
These somewhat small scale businesses contribute at least a third to the Indian GDP. Such small-scale
businesses require special lending norms. Applying for a loan in a bank involves investing a lot of time, a
lot of paperwork and some collateral pledge.
NBFCs, on the other hand, serve the purpose of lending money to small-scale businesses with relatively
relaxed norms. NBFCs have become the go-to option for MSMEs as they fulfill their loan requirements readily.
Some instances, companies are not even required to pledge collateral to obtain a business loan from NBFC.
NBFC loan companies have made the whole process of getting funds more relaxed than ever.
2. Pre-Approved Loan Limit: Businesses enjoy a pre-approved loan limit upon
taking a loan from an NBFC loan company. Companies can withdraw funds as per their requirement whenever they
want. They do not have to request for multiple approvals from financing institutions every time they require
funds.
Moreover, businesses only have to pay the interest for the amount that they use out of the approved loan
limit. Banks, on the other hand, require companies to pay for the whole amount. Therefore, procuring a
business loan from NBFC is more beneficial to businesses as they have to pay a lower monthly EMI.
3. Flexi-Business Loan Options: Flexi interest-only business loans provide the
option of paying the principal amount at the end of the loan period. Companies only have to pay for the
interest amount in the monthly EMIs, therefore, further decreasing the monthly EMI amount.
NBFCs are, thus, changing the prospect of business loans in India and are fulfilling the loan requirements
of Indian businesses in the most comfortable manner possible.
NBFC Loan Eligibility Criteria
Though not very stringent, NBFC loan company do have some eligibility criteria to access a borrower's
application. These criteria are as follows:
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The business should show a positive trend in its turnover.
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Minimum annual income as expected by the loan company should be shown and supported with proofs.
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The company's time in business – to check stability and credibility.
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Balance sheet audited by CA.
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The age of the applicant should be between 22-65 years. This criteria may vary from lender to lender.
So, you need to keep the business documents well-maintained and timely audited to become eligible for loans
for business purposes from NBFCs.
Required for NBFC Instant Loan
For speedier approval, you must keep the following documents ready and updated. Though these are not
mandatorily required for the loan application but can be asked at any point in time.
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GST returns
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Income tax returns
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KYC verification documents of the company
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Board resolution.
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Bank statement
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KYC documents of business owners
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Business continuity proof
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A copy of the filled application forms
Keeping all these documents handy, updated and verified, helps a business owner to get loan from NBFCs
quickly.When approaching any NBFC, you can expect them to ask for these documents right at the start or
during the approval process. So to avoid any delay.
Types of Loans Available with NBFC Banks
Any business undertaking a project of high importance, like infrastructural projects, setting a factory, or
moving to new markets may require additional money to meet the extended objectives. Some of the business
loans you can apply for by approaching NBFCs are as follows:
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Business Term loan
When you are quite confident about the time business will start paying back, you apply for business term
loans.
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SME loans
These are the loans that are extended to small and medium-sized enterprises. These loans are approved,
keeping the business turnover and worker strength in mind.
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MSME Loans
These are the loans for micro, small and medium enterprises. These businesses are mostly operating from
homes or rented spaces and do not have a workforce going beyond 20 people.
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Machinery loans
These loans are required to buy any equipment or machinery. The machine's depreciation is considered
while deciding the terms of these loans.
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Overdraft loans:
Mostly, these are unsecured loans. Just like banks offering OD facility, the NBFCs offer overdraft loans
to the borrowers who require money for cash expenses or other daily operations' expenses.
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Working capital Loans
Working capital is the money needed to carry out operational expenses, buying raw materials, hiring
logistics services, etc. The aim is to keep the business working, and the capital needed for it is
financed to ease the immediate burden of expenses. Sometimes, when the businesses are putting an expansion
plan in action, the capital needed to carry out this plan can be arranged by taking working capital loans.
Steps Involved in Applying for Business Loans from non banking financial companies
The process of availing business loans from NBFCs involves the following steps:
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Enquire about various NBFCs and their lending plans. If they accept online applications, give it a
shot. Else, you can visit the NBFCs' offices or ask their representatives to meet you to explain to
you the loan plans.
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Once you have picked your NBFC, they will help you with the 'required documents' list and share their
eligibility criteria.
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Next, fill a loan application form and attach all required documents.
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NBFCs verify the information furnished in the application form. They may also ask the borrower to
meet for a one-to-one meeting regarding business objectives, plan explanation, etc.
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Once NBFCs are satisfied, they approve the loan and start the sanctioning process. If the loan is to
be disbursed in parts, the terms for the same are agreed upon.
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In case of full loan disbursement in one go, the NBFCs park the fund in the borrower's bank account
after due verification.
Due to technically advanced solutions, the process of loan approval and sanctioning has become quite fast
these days. NBFCs issue business loans as soon as possible, allowing businesses to execute their starting or
expansion plans without worrying about the financial requirements.
Charges Applicable In The NBFC Loan
There are a few charges that the business owner or borrower needs to bear to get the business loan from
NBFCs. These charges may comprise the following:
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Loan processing fee
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Pre-payment charges
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The variable fee, including stamp duty, amortization fee, cheque swap fee, and others as suggested by
NBFCs.
How to Select nbfc company for a Business Loan
Selecting NBFCs for taking a business loan can be a tricky process. Listed here are some pointers to
consider to pick NBFCs for a business loan:
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Find about the pre-approved business loan limit
If their pre-approved loan limit matches your requirement, that NBFC is meant for you.
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Focus on customer service
The best financing company will be one that has proactive customer service enablers. It can help you
settle all your doubts and provide you timely updates regarding the application processing.
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Easy loan approval requirements:
The less the requirements, the more hassle-free the loan process becomes.
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Lots of financing options
If the NBFC is dealing in numerous business loan options, you have the flexibility of choice. Also, it
can match you more quickly to the type of loan available.
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Cheap interest rates
Obviously, the company that offers cheap business loans can help you keep the cost of capital low and
manageable.
Take care of all the points mentioned in this guide. These are well-researched pointers that cover the
working of almost all NBFCs functional in business loan space.
FAQ's Realted To NBFC
What is nbfc?
NBFC is a non-banking financial company, that provides financial services to businesses and functions as
per the Indian Companies Act giving banking facilities to the public. NBFC is also known as Non-Banking
Financial Institutions.
What is NBFC meaning?
A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956. And NBFC
provides financial services & banking facilities to businesses without meeting the legal definition of a
Bank.
What is NBFC loan?
A loan or business loan from NBFC is referred to as an NBFC loan. The interest rates of business loans from
NBFC ranges from 15% to 24% per annum.
How Indifi can help you get a business loan from NBFC?
Indifi helps you provide business loans at competitive interest rates. Once you visit our website and fill
the application with the minimum required documents attached, our customer care executive and follow you
back with the further process, and the required loan amount will be disbursed in 1-3 days.
How to apply for NBFC business loan?
Visit NBFC like Indifi online and apply through it by filling the application form and uploading the
minimum required documents. Once the required documents are received, our executive will call you back for
the further process. And the loan amount will be credited to your account in 1-3 days.
What are the benefits of applying for business loan from NBFC companies?
