Non-banking financial companies (NBFCs) are the second-largest lenders that provide micro-credit facilities to small business owners. The total market share of NBFCs is estimated to be more than 30%.
NBFCs are fast gaining popularity as the most preferred lender for small business loans. Here are the advantages of availing of a loan for your business from an NBFC:
- Easier eligibility norms
Small and medium enterprises (SMEs) had limited access to formal credit facilities offered by banks due to stringent eligibility-related conditions. However, NBFCs have simple SME loan eligibility criteria. For instance, your business must be in existence for at least three years with a profit in the previous year. The loan is available to different businesses that include original equipment manufacturers (OEMs), automobiles and auto ancillaries, and food-processing.
- Simple documentation requirements
Another limitation faced by SME business owners while applying for loans from banks was the humungous documentation, which made the entire procedure cumbersome and time-consuming. In comparison, the SME loan documents required by NBFCs are minimal. These include audited balance sheets for the last three financial years, the purpose of the loan, business profile explaining the current process, and know-your-customer (KYC) documents. This ensures that the complete process is tension-free. If you already have completed the KYC process with your bank, you do not have to undergo the procedure again while applying for a loan from an NBFC.
- Collateral requirements
Most banks require hard assets as a security cover for the loan. Additionally, the security cover needed may be higher when compared to NBFCs. Most NBFCs accept different types of collaterals to cover offline or online SME loan solutions, which makes it more convenient for businesses to avail of such credit facilities. Some lenders may also offer unsecured loans, albeit at a higher rate of interest.
- Flexible repayments
NBFCs comprehend the complexities related to running a small business and offer flexible repayment terms to suit the SME’s or MSME’s financial situation. You can opt for increasing or decreasing equated monthly installments (EMIs), or choose a bullet payment as per the present monetary position of the business, to repay the loan. Moreover, NBFCs offer affordable SME loan interest rates and longer repayment tenure, which make it simpler to repay the borrowed amount.
- Quicker approval and disbursal
Often, banks take a longer time to approve your loan application because of the strict eligibility requirements and many documents involved. In comparison, NBFCs can process and sanction your application at a faster rate and ensure swift disbursal of funds.
Visit the Mahindra Finance website to know more about SME loans and apply for one today!