Synopsis: The business landscape in 2024 will witness remarkable growth, with experts advising an uptick in demand for fast loans among enterprises aiming to seize lucrative opportunities. In this regard, explore why NBFCs might be a better fit for your business loan needs than traditional banks.

A recent study shows that nearly 60% of businesses across all verticals will need credit to boost their business in 2024. There are several platforms available for businesses to meet capital needs. Amongst all, entrepreneurs often feel the pressure to choose between NBFCs and other traditional mediums, such as national banks. When it comes to processing and approval speed, NBFCs easily meet the critical needs of businesses and prepare them to capitalise on opportunities without delays. Let’s understand why NBFCs are the preferred choice for business loans and what they do differently than traditional banks to maintain such a reputation.

Five Advantages of NBFC Business Loans

Flexible Eligibility Conditions

NBFC commercial loans provide one particularly compelling advantage – their lenient eligibility conditions. Traditional banks often operate as gatekeepers, demanding a high credit rating (for example, over 750, according to CreditMantri), numerous years of verified business operations (frequently 3 or more years as outlined by Investopedia), and sizable annual revenues. These stringent requirements regularly make it difficult for many pioneering or developing companies to access the funds necessary for growth. NBFCs, alternatively, adopt a more accommodating approach, looking beyond credit histories alone and focusing on a business’s future potential. This renders them a practical choice for startups, small enterprises, and those with less-than-perfect credit backgrounds. However, NBFCs maintain the right to decline applications as they see fit.

Lightning Speed Funding

In today’s rapidly evolving commercial world, every single business hour counts. NBFCs appreciate this urgency and deliver quick fund disbursements, unlike conventional banks known for their complex verification practices and lengthy paperwork.

NBFC operations often need more documentation and accelerated approvals. This enables entrepreneurs to access vital capital without delay, allowing them to leverage opportunities ahead of their competitors. For example, with NBFC support, a startup may bridge the time gap between signing a contract and meeting initial milestones to create a maximum impression. Further, while traditional banks cautiously scrutinise each application, NBFCs actively assist ventures in distress. Their responsiveness revives small businesses by helping them overcome funding droughts and get their businesses back on track during financially challenging moments.

Competitive Rates and Lower Charges

While interest rates play a vital factor, the same needs to be viewed from a broader perspective. Though it is inaccurate to state that compared to traditional banks, NBFCs sometimes quote the lowest interest rates; the latter provides a better package regarding the cost of borrowing. The NBFCs do not fall under the Prime Lending Rate regime as per the Reserve Bank of India. This gives NBFCs a better leeway in offered rates. Moreover, the NBFCs offer highly competitive interest rates to the borrowers; hence supply credit at lower interest rates than the regular banking systems. The processing charges are extremely easy and do not impose any other kind of charge on the customers, thereby giving more value for money credit options than the financial institutions.

Paperless Loan Processing

The global digital lending platform market is forecasted to grow steadily at a rate of 14.3% annually from 2023 to 2032.Many NBFCs now offer paperless loan processing via user-friendly fintech platforms in line with the digital revolution. This frees the need for business owners to go out and apply for loans in person, either at an actual branch or by contacting intermediaries. Busy entrepreneurs save considerably on time and labour with this streamlined method. Instead, they can devote that precious time to where it counts, such as closing new clients, planning marketing strategies, and innovating products or services.

Financial Flexibility

Nowadays, NBFCs offer business loans with pre-approved limits and no hidden charges to have a competitive edge in the market. Business owners are eligible for pre-approved loans based on their credit history, income, employer’s profile, etc. They can withdraw funds as needed, with interest incurred only on the utilised amount. This translates to lower EMIs than a fixed loan structure and frees up valuable capital for other pressing business requirements.

Additionally, pre-approved loan limits act as a financial safety net and offer immediate access to funds when unexpected expenses arise. This can be particularly beneficial for businesses battling seasonal fluctuations or unforeseen circumstances.

NBFCs are an attractive option for growing businesses looking for quick and flexible financial solutions. Unlike traditional banking domains, they offer pre-approved loans with high flexibility, controlled costs, and a financial buffer.

Three USPs NBFCs Have Over Most Traditional Banks

Easy Document Processing

One of the significant advantages of NBFC business loans is their less stringent documentation requirements.

Traditional banks often require physical copies of several documents for loan processing, like:

• Personal Documents
• Business registration documents
• Licences and permits
• Financial statements
• Bank statements for the past 6 months

However, NBFCs typically require minimal paperwork. They use alternative data sources to collect information digitally with your consent. For instance, NBFCs can fetch your bank transactions and GST filings with your consent to assess your creditworthiness within a few minutes.

This simplified approach is particularly beneficial for startups and smaller businesses who lack resources or manpower in their early days to manage such complex documentation procedures each time they need an urgent loan.

No Collateral Needed

NBFC business loans come with zero collateral requirements. Unlike traditional banks, which often mandate collateral such as property or equipment to secure the loan, most NBFCs do not demand such guarantees. According to a report by RBI, many MSMEs in India lack access to formal credit due to inadequate collateral. For such businesses, NBFCs offer a lifeline. By eliminating the need for collateral, NBFCs open doors for startups, young businesses, and those without substantial assets to access the capital they need to grow and operate. This empowers them to focus on building their businesses rather than worrying about putting their valuable assets at risk.

Faster Loan Approvals

Nearly 29% of borrowers prefer online loans as they come with faster loan approvals and disbursements. Unlike traditional banks, NBFCs can offer lightning-fast loan processing features because of their streamlined online procedures, which involve minimal paperwork and fewer bureaucratic hurdles. This is a critical advantage for businesses always ready to close lucrative deals with a quick loan on the go. Besides, entrepreneurs might also encounter urgent financing needs to bridge a temporary cash-flow gap or cover unforeseen expenses. In this regard, rapid access to capital through NBFCs can make all the difference.

End Thoughts

NBFCs work with a streamlined application process to save entrepreneurs’ valuable time and hassle associated with loan applications. They eliminate unnecessary documentation and create a smoother and more convenient loan journey for businesses to focus on their core operations while securing the necessary funding. This simplified approach is why startups and smaller businesses prefer NBFCs to access the capital they need to grow and operate.

Inspired by the possibilities? Protium is here to empower your entrepreneurial journey with our innovative fintech solutions. Protium offers a faster, more flexible approach to business loans, unlike traditional lenders.  We provide secured and unsecured loans to MSMEs across India so you can access the capital you need to scale up, bridge cash flow gaps, or meet operational expenses – all with a streamlined digital application process. Don’t let funding limitations hold you back. Get a free quote from Protium today and see how we can fuel your business ambitions.