NBFC Loan

NBFC stands for non-banking financial companies. Businesses prefer NBFCs because the loan terms are flexible and the eligibility requirements are less stringent. In addition, since NBFCs offer various types of loans, business owners can select a loan that suits their needs and purposes.

The following is a quick guide on what you need to know before applying for a business loan from an NBFC. Helping you find the right lender can also help you receive all approvals on time, allowing you to focus on the rest of your business plans.

NBFCs have undergone a significant transformation in how they operate in India in the last few years. Businesses welcome the NBFC loan companies with open arms because they make obtaining loans relatively easy. 

NBFCs don’t only contribute to the financial system, but they also contribute to the development of infrastructure, which generates employment. NBFCs are performing better than banks, according to the recently released Financial Stability Report from RBI, and they are contributing more to Indian economic growth than banks.

There are various types of NBFCs. Some of the most well-known are:

  1. Card clubs as well as casinos
  2. Examples of securities and futures firms are brokerages, investment advisers, collective investment schemes, hedge funds, and commodity traders.
  3. Companies that provide financial services (MSB)
  4. Companies that provide insurance
  5. Companies that lend or finance money
  6. Credit card system operators

NonBank Financial Companies: An Overview

Primarily financial institutions that do not possess a banking license are known as Non-Bank Financial Companies (NBFCs) or Non-Bank Financial Institutions (NBFIs).

Typically, these institutions cannot accept traditional demand deposits from the public. Such deposits are readily available funds, such as funds in checking or savings accounts. Due to this limitation, federal and state regulators cannot oversee them conventionally.

A company primarily engaged in financial activity, especially NBFC, must adhere to the act if over 85% of the total assets or consolidated revenues are financial. A few examples of nonbank financial companies are:

  1. Investment banks
  2. Mortgage lenders
  3. Money market funds
  4. Insurance companies
  5. Hedge funds
  6. Private equity funds

Features of NBFC Finance Loan in India

If the existing banking institutions cannot meet the needs of small businesses, NBFCs may be able to help. NBFCs in India are changing the situation of businesses for the better through the prospect of business loans.

If the existing banking institutions cannot meet the needs of small businesses, NBFCs may be able to help. NBFCs in India are changing the situation of businesses for the better through the prospect of business loans.

1. Easy and Simple Lending Norms: 

The Indian economy has seen several micro, small, and medium enterprises (MSMEs) emerge. In India, small and medium-sized enterprises account for more than a third of GDP, requiring special lending guidelines. To request a loan from a bank, you must invest many hours into paperwork and pledge collateral. 

NBFCs, on either hand, give loans to business owners due to a comparative lack of regulations. NBFCs are now the go-to alternative for Small and medium enterprises due to their ease of loan fulfillment. In some instances, businesses weren’t even needed to pledge collateral to acquire a bank loan from an NBFC. NBFC loan firms have made the entire process of obtaining funds more accessible than ever before.

2. Quick Pre-Approved Instant Loan Limit:

A firm obtains a loan from such an NBFC lending institution receives a before the loan limit. Businesses can withdraw finances when they see fit. They are not required to seek multiple approvals from banking firms when they require funds.

Furthermore, business owners have only to pay interest on money they use from the authorized loan limit. Financial institutions, on either hand, demand that businesses pay the entire amount. As a result, obtaining a business loan from an NBFC is more advantageous because businesses must pay smaller monthly installments.

3. Flexible Business Loan Choices: 

Adjustable interest-only bank loans allow you to pay the principal balance at the end of the loan term. Businesses only have to cover the interest sum in a month-to-month EMIs, which reduces the monthly EMI amount even further.

Thereby, NBFCs are shifting the possibility of financing options in India and meeting the loan needs of Indian businesses in even the most convenient conceivable way.

Other Additional Benefits of NBFC Business Loan:

  1. Interest rates are typically provided, starting at 10.99 percent per annum.
  2. The loan value is typically up to Rs 35 lakh.
  3. The loan sanction period typically ranges from one to five years.
  4. Besides speculation, and personal issues.
  5. No requirement for security/collateral when taking out a loan.
  6. Consumers who have been pre-approved for instant financing
  7. A service fee of up to 4% is applied.

Essential Documents Candidate needs for Business Loan Application

  1. Application form duly completed and photographs attached.
  2. PAN Card/Voter ID/Driving Licence/Aadhaar Card/Passport are acceptable forms of identification.
  3. Aadhar Card/copy of ration card/Voter ID/Driving Licence/Passport/electricity bills/gas connection bills can be used as Address Proof.
  4. Bank account statement for the previous six months
  5. Income slips for the last three months
  6. Form 16
  7. ITR for the past three years.

Steps to Apply for Business Loans from NBFCs

The process involves the following steps in obtaining business loans from NBFCs:

  1. Inquire about different NBFCs and their lending strategies. Give it a shot if they accept online applications. You can also go to the NBFCs’ offices or ask their representatives to meet with you to explain the loan plans.
  2. Once you’ve decided on an NBFC, they’ll assist you with the “documents required” list and start sharing their eligibility requirements.
  3. Fill out an online loan application and link all necessary documents.
  4. NBFCs verify the data provided in the application form. Individuals may also request a one-on-one meeting with the borrower to discuss business goals, plan explanations, etc.
  5. Once the NBFC is satisfied, the loan is approved, and the sanctioning process begins. The loan terms are agreed upon if it is to be disbursed in installments.
  6. If the entire loan is disbursed at once, the NBFCs deposit the funds in the borrower’s bank account after proper verification.
  7. Because of technologically advanced solutions, loan approval and sanctioning are relatively quick. NBFCs grant business loans early, saving time and letting the businesses execute their actions or expansion projects without stressing over the financial requirements.

Things to consider while choosing an NBFC:

Here is mentioned a checklist you must consider while choosing an NBFC for your business loan:

  1. Business Loan Interest Rates – The loan interest offered by an NBFC must be low. Choose an NBFC which offers you the best interest rate.
  2. Loan Amount – Choose an NBFC that can sanction loans that meet your requirement. 
  3. Loan Terms and Conditions – Carefully read all terms and conditions before applying for a loan from an NBFC.
  4. Processing Fees – The processing fees for the loan should be comparatively low instead of high. Consider an NBFC that offers minimal or no processing fees. 
  5. Prepayment Options – Look for an NBFC that offers multiple prepayment options such as lump-sum payment or EMI options, including monthly EMI, yearly EMI, or quarterly email.
  6. Add-on Benefits – Today, NBFC offers multiple add-on benefits such as exclusive offers on special debit cards and credit cards, gifts or hampers, 24*7 customer executive service, and many more.

Charges Involved in the NBFC Loan

To obtain a business loan from an NBFC, the business owner or borrower must pay a few fees. These fees may include the following:

  1. Fee for loan processing
  2. Prepayment penalties
  3. The variable charge, includes stamp duty, amortization fees, cheque interchange fees, and additional fees recommended by NBFCs.

Difference between taking a loan from a bank and an NBFC

NBFCs lend and invest, and thus their activities are similar to those of banks; however, there are a few differences, as listed below: 

  1. NBFCs and banks are service-driven industries, but NBFCs are more customer-centric when providing customer services.
  2. When compared to banks, the lending procedure with NBFCs is smooth. While banks typically take many days to weeks to process a loan,
  3. NBFCs can handle an application within 24 hours after its approval. When it comes to loan approval, NBFCs are more flexible than banks.
  4. When compared to banks, the lending procedure with NBFCs is smooth. While banks typically take many days to weeks to process a loan, NBFCs can handle an application within 24 hours after its approval. When it comes to loan approval, NBFCs are more flexible than banks.
  5. Customers can now borrow money from most NBFCs online, uploading information digitally and getting funds transferred into their accounts without leaving their homes. While banks still require the physical presence of the borrower as well as hard copies and lengthy paperwork.
  6. Interest rates offered by NBFCs are much lower than those offered by traditional banks.

Different Types of NBFCs

Here are some of the different types of Non-Banking Finance Companies:

  1. Investment companies
  2. Loan companies
  3. Asset Finance companies
  4. Mortgage Guarantee companies
  5. Housing Finance companies
  6. Core Investment companies
  7. Infrastructure Finance companies
  8. Microfinance companies.

Different Types of Loans You can Avail with NBFC Banks

There are several business loans available from NBFCs to businesses undertaking high-priority projects, including infrastructure projects, establishment of new factories, and expansion of markets.

  1. Business term loan: A term loan is a short-term to long-term loan provided by banks to businesses. This amount is used by businesses to cover their working capital needs, asset purchases, expansion, and so on. The duration and interest rate of a term loan are determined by the kind of loan product chosen by the company.
  2. SME loans: These are the loans given to small and medium-sized businesses. These loans are issued while considering the business turnover and employee productivity.
  3. MSME Loans: MSME refers for micro, small, and medium enterprises; it is frequently abbreviated as SME for small and medium enterprises. However, MSME and SME Loans are essentially like this and are available to organizations that fit into these two major categories. These loans are often granted relatively briefly to beginning entrepreneurs, small company owners, and female entrepreneurs.
  4. Machinery loans: These loans are necessary to purchase any equipment or machinery. The machine’s devaluation is considered while determining the terms of these loans.
  5. Overdraft loans: Overdraft is a sort of credit offered by lending institutions. It enables the borrowers to deposit monies over the loan amount and withdraw as required. The lender establishes an account with an overdraft limit for you. It is the balance owing on your house loan.
  6. Working capital Loans: Working capital aims to ease the immediate cost burden on the business by covering expenses, such as buying raw materials, hiring logistics service providers, etc.

Why Lendingkart.com for Business Loan?

When it comes to ease of seeking lending facility; we at Lendingkart score over others in a number of ways. We are a non-deposit NBFC in the business of lending providing credit with a range of products:

At Lendingkart, our focus is not on the past antecedents of the prospective borrower, but the potential and the credit risk of our clients with an emphasis on the current cash flows and business growth. We are well endowed with the services of our fin-tech start-up arm, providing an accurate assessment of the creditworthiness of clients through the accumulation of data from various sources and efficient analysis tools. The key factors that make us at Lendingkart the choice destination for our range of loan products are:

  • Though working out of Ahmedabad, Bengaluru and Mumbai at present, the services are extended pan India.
  • Ease of online application in full that takes only a few minutes to complete.
  • Fewer documents are sought.
  • The absence collateral security.
  • Disbursal of loans is the quickest in the industry, which is ensured in three days.

In fine, we at Lendingkart.com aim to provide a seamless credit experience to our clients to conveniently concentrate on the business rather than on the cash flow gaps.

NBFC Loan FAQs:

1. Why are NBFCs called shadow banks?

NBFCs are often called "shadow banks" because they operate similarly to banks but with very few regulatory controls. Except for a few, they cannot accept deposits from individuals and must raise funds through bonds or take out loans from banks.

2. Is it legal for an NBFC to make a loan to an individual?

NBFCs allow borrowers to be members of SHGs or JLGs. As a member of a JLG or an SHG, the borrower can borrow from an NBFC. The borrower cannot borrow from more than two NBFC-MFIs at once, whether they are JLGs or individuals. Additionally, individuals can borrow from NBFC-MFIs on an individual basis.

3. How much does an NBFC charge for processing?

An NBFC-MFI will not charge a processing fee of more than 1% of the loan's gross amount. The fee is not required to be factored into the margin cap.

4. How do I apply for a loan from an NBFC?

NBFC lending standards are incredibly lax. In some cases, MSMEs are not required to put up collateral for the loan. The lending process can start if you have a high credit score and a registration form.

5. Can an NBFC provide its customers with unsecured loans?

NBFCs can offer unsecured loans through overdraft, cash credit, and bill discounting. The loan minimum will be higher than that of nationalized banks.

6. Does an NBFC personal loan affect your credit score?

Getting a personal loan from an NBFC will affect your credit score just as much as getting a personal loan from a bank. NBFC obtains the credit report of a loan applicant when he applies for a loan. A loan application is evaluated with the help of these lender-initiated credit report requests. The credit bureaus lower the credit score a bit for each hard inquiry.

7. What is an NBFC loan?

An NBFC loan is a loan or business loan from an NBFC. The annual interest rate on business loans from NBFCs ranges from 15% to 24%.

8. How can an online platform help you get a business loan from NBFC?

Online NBFC platforms help you provide business loans at competitive interest rates. You may visit the provider's website to complete the application and attach the minimum documents. A customer care representative will assist with the further process, and your loan will be disbursed within 1-3 days of your application.

9. What are the nominal charges applicable when you take an NBFC Loan?

To obtain a business loan from an NBFC, the business owner or borrower must pay a few fees. These fees may include the following:1. Loan processing fee, 2. Pre-payment chargesThe variable fee includes stamp duty, amortization, cheque swap, and other NBFC-suggested fees.

10. How do NBFCs process the borrowing process?

Accepting non-checkable deposits, primarily term deposits. Even so, it is important to note that not all NBFCs are permitted to deposit money, as this results in adherence with a greater number of RBI rules and reg.