A Non-Bank Financial Company (NBFC) means a financial institution which is involved in providing financial services, but it is not a bank. The question that may arise in the mind of an entrepreneur or a company or corporation which is in search of funds is whether to go to the conventional banking sector or look for other or new sources of funding. NBFCs have often become popular among the SMEs, startups, and even large organizations as they have replaced traditional banking companies. Even though traditional sources of funds include the money that is provided by banks, NBFCs are beneficial in many ways.
Reasons why it may be wise to use an NBFC for your company financing needs
1. Quicker Loan Payment
- Quick Processing: NBFCs are distinguished by a much faster rate of approval and releasing of loans compared to the banking institutions. There are common factors such as cumbersome formalities, delayed loan sanction, and fine procedures to follow in banks but in NBFC there are less documentation formalities and quick sanction of the loans.
- Streamlined Procedures: NBFCs usually do not employ a lot of bureaucracy and as a result cut down on the time spent on filling forms and seeking approvals.
2. Adaptable Loan Options
- Tailored Loan Solutions: Sometimes you may require a working capital loan or equipment financing, sometimes you may require expansion capital; sometimes you may require a term loan or perhaps all these and many more, NBFCs usually launch products with a lot of flexibility in its terms.
- Flexible Repayment Options: This means that you can change the duration for a loan or a loan’s form in dependence with cash flow calendar years for your business; this is suitable for any business that has fluctuated earning points for years.This implies that you are able to lengthen or shorten the loan period depending with the cash flow capability of the business.
3. Relaxed Requirements for Eligibility
- Easier Access for SMEs and Startups: The NBFCs usually have a larger appetite than the banks vis-à-vis risk, they are willing to lend to newly formed companies or to companies, which do not have a credit history in India.
- Lower Barrier to Entry: NBFCs who are well aware of the problems faced by small and medium enterprises tend to have low entry barriers. For instance, they may not require you to have a clean record on your credit score or probationary securities.
4. Reduced Paperwork
- Minimal Documentation: It’s interesting that NBFCs do not necessarily have to involve the same amount of paperwork as banks. While the banks request wide legality to access your eligibility, NBFCs ask for fewer formalities and follow a simple procedure to apply for the loan.
- Simplified Application: The documentations that are usually required in NBFCs are somehow easier to be provided in comparison to those big business firms who might have hard time preparing the complex and large financial records.
5. No Loan or Asset Needed
- Unsecured Loans: Huge number of NBFCs provide unsecured loans, it implies that companies do not have to provide collaterals like property or any other assets to get the loan. This is a great advantage for organizations that probably do not have any form of security to pledge as security.
- Alternative Collateral: In cases where it asks for collateral, NBFC is not averse to unconventional forms of collateral either. This flexibility helps business people to access the loans since they use other forms of security rather than real estates and physical assets.
6. Interest rates that are competitive
- Attractive Rates for SMEs: The interest rates at NBFCs are slightly higher than banks, yet offer comparable or slightly higher rates; quick processing time, low documentation requirements, and freedom from rigid guidelines.
- No Hidden Fees: While most NBFCs are clear with their charges and interest rates, there is very little that remains hidden from the customer. It reduces the number of what you might refer to as either hidden costs or compounds to the basic fine print terms that mean you can only see the real cost of borrowing after you have signed up for a specific loan product.
7. Improved Assistance for Non-Traditional Companies
- Support for Niche Industries: NBFCs are more willing to offer credit to those industries or sectors which may not be eligible for it under the regulations governing banking operations. For instance, firms operating in the technology, startup, or new age sectors are able to secure loans from NBFCs which are aware of the potential of the said businesses and their requisite financing.
- Specialized Lenders: There are NBFCs that focus their lending activities in certain sectors of the economy for instance manufacturing, construction or retail sectors because they can provide more products that are appropriate to the business, advice is more suitable for the business.
8. Obtaining Specialized Loans
- Targeted Financing Options: NBFCs cater much-required specific products that are not offered by banks or by banks fully. For instance, if you require funds for working capital loan, equipment loans or asset backed loans, then NBFCs should be able to offer products to suit.
- Growth-Oriented Products: Besides conventional business loans, NBFCs might include recovery-oriented credit products; expansion credit products to expand operations, enter new markets or markets with existing operations; and technology/infrastructure credit goods. This helps business people get the money needed so that the ventures can expand and earn more money.
Conclusion
Selecting an NBFC for your business loan needs come with a list of prospects which can be quite rewarding to the small and medium enterprises, and even start-ups. Including quicker loan disbursement, looser credit standards, and tailored services, NBFCs are far superior to bank loans. Also, their operation across different markets with early stage, existing as well as growth-oriented businesses as clients, offered competitive and prime lending rates, and unique loan products that are tailored to meet every business owner’s needs make them the best place for businesses to obtain loans from.It serves those organizations that require some specific type of loan, different guarantees, or individual strategies in financing.