NBFCs or Non-Banking Financial Companies have existed in the financial landscape for a long time. With the further opening up of the financial sector, they have been able to provide a yeomen’s service to their customers.
They are regulated by the Companies Act, 1956. A Non-Banking Financial Company is categorised under three heads: Loan companies, Asset Companies and Investment Companies.
One of the reasons why NBFCs were allowed to provide business loans to consumers is because the government of the day deemed competition necessary to improve the overall financial sector. There has not been any looking back from then. NBFCs have some of the highest service ratings and a large chunk of the business community avails it.
However, before you begin to prepare for a loan from one of the several NBFCs, here are six things to know about NBFC business Loan.
The PSBs or Public Sector Banks and the Private sector ones are governed by stringent rules and conditions. While, NBFCs are governed by either RBI or under the Companies Act, 1956. This provides the NBFCs greater flexibility in dealing with their consumers.
A business owner, while trying to figure out a source for his or her business loan is often confused about whether to avail it from a bank or an NBFC. Services from NBFCs are more personalised and have a larger amount of features.
Ziploan is an RBI registered NBFC, which provides business loan with an attractive rate of interest and with minimal documentation. Moreover, you can also avail a business loan online from their website or through mobile loan app.
Less Complex Loan process
NBFCs, because of their management structure and business model have a less complex loan procedure. Banks on the other hand have a greater bureaucracy which often leads to a long and winded loan processing mechanism. The usual time taken for an NBFC to disburse a loan is 3 days compared to the extended period a bank takes.
Most NBFCs are now using online applications to process the loan that make it easier for them to disburse the loan without making any fatal error.
Diverse Credit Evaluation System
An NBFC has a diverse credit evaluation system and does not only rely on the credit score or a CIBIL score. A business owner might have had a couple of rough years, which is quite imaginable in the world of business.
This shouldn’t become a point of concern for the NBFC. Their approach towards approving a business loan is more holistic than that of a banking institution.
An MSME loan is a necessity and helps a business grow. NBFCs understand the urgency and the need to help business owners grow. NBFC like Ziploan has their own ways and criteria of evaluating the applicant, which is also known as Zipscore.
NBFCs have some of the most competitive business loan interest rates in the market. Their business loan interest rates are generally at par or less than that of the banks. There are also a few NBFCs that do not charge any prepayment penalty. All this makes an NBFC a more attractive choice for the applicant.
Since every business whether small or a big one wants to be online so is NBFC. NBFCs are now processing loan application online and even calculate interest rate online that make it fair for each applicant.
Because of the flexibility that the NBFCs show, the business loan eligibility is also relaxed compared to banks. The business loan documents need to be in order and the credit score can be satisfactory instead of stellar, which most banks look for.
NBFCs also provide greater loan relief compared to the other banking institutions. The government has also allowed NBFCs to provide CGTMSE loans under the various schemes, as proposed by the former.
One of the concerns that most applicants have is how safe is it to deal with an NBFC. An NBFC like Ziploan is guided by RBI and is answerable to the authorities in case of any discrepancy. They also have constant financial audits to check their financial health. Hence, it is safe to do business with them. Moreover, with the range of services that they provide, it is an attractive proposition to avail of a business loan from an NBFC like them.
Lastly, A Non-Banking Financial Company provides an applicant with a greater deal of flexibility and range about business loan interest rates and loan features. Their interest rates are lower or at par with the banks and hence availing of a loan from them is less cumbersome.