Business Loan Without Colletral Security

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 Finance Loan 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. In 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.

Eligibility Criteria for NBFC Loan

Though not very stringent, NBFCs do have some eligibility criteria to access a borrower’s application. These criteria are as follows:

  • The business should show a positive trend in its turnover.
  • Minimum annual income as expected by the loan company should be shown and supported with proofs.
  • The company’s time in business – to check stability and credibility.
  • Balance sheet audited by CA.
  • The age of the applicant should be between 21-65 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.

Documents Required Finance Loan for NBFC

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.

  • GST returns
  • Income tax returns
  • KYC verification documents of the company
  • Board resolution.
  • Bank statement
  • KYC documents of business owners
  • Business continuity proof
  • 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:

Business term loan

When you are quite confident about the time business will start paying back, you apply for business term loans.

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.

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.

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.

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.

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.