Why MSME Loans from NBFC is the Ideal Choice for Small Business Owners?
Published: June 28, 2022
MSMEs, also known as Micro, Small and Medium Enterprises contribute to almost 35 per cent of India’s GDP and they provide employment to a large part of the country’s population. It is also a well-known fact that these small businesses need funds in order to maintain their growth and expand themselves further. When it comes to choosing the right financing option, MSMEs generally find themselves stuck between banks and NBFCs (Non-banking Financial Companies).
Availing a bank loan to get over a financial crisis in business is a traditional option, while the concept of NBFCs is relatively new. But in the current scenario, bank loans are more suitable for big businesses and taking a loan from NBFCs is the most preferred option for MSMEs.
Let’s dive deeper and discuss a few factors that make NBFCs a better choice for availing MSME loans:
Quick Disbursal
Applying for a business loan from a banking institution requires a good amount of paperwork and the entire process is time-consuming. On the other hand, applying for an MSME loan from NBFCs is a quick process with minimum documentation requirements. Loan approval is faster as there are no stringent lending terms and verification processes. Whether you need an MSME loan for starting a new business or expanding the existing one, getting a quick fund disbursement is something you always look for.
Better Loan Options
Generally, NBFCs offer a wide range of business loans that can be availed by small-scale entrepreneurs. NBFCs are aware of the financial needs of small businesses and this is something that helps them to come up with financial products designed to meet the specific requirements of these businesses. From working capital loans to term loans and equipment financing, there are a number of options available to choose from.
Flexible Interest rates
When choosing a financing option, the interest rate applicable on the loan is the most important factor for a borrower. As compared to banks, NBFCs offer better interest rates on SME loans in India. A lower rate of interest will automatically lead to lesser EMI payouts, which is a great advantage for businesses applying for an MSME Loan.
Lenient Eligibility Criteria
Another important reason for choosing NBFCs as a go-to financing option for MSME Loan is the flexible eligibility criteria they have. When it comes to sanctioning a loan, NBFCs are comparatively lenient, making the loan approval process easier and faster. While all types of lending institutions look at factors like your credit score, current debts, annual income, etc. before approving a loan, NBFCs deal differently. An MSME loan for small businesses can be availed despite having a low credit score.
Flexible Repayment
The flexibility you get for loan repayments is an important factor in choosing the right financing option. When availing an MSME Loan from an NBFC, business owners get the flexibility to choose their preferred repayment option and loan tenure.
Given all these advantages, there is no denying the fact that NBFCs are an ideal choice for availing an MSME loan for small businesses. But when it comes to finding the best NBFC for business loans, things get a little trickier as there are a number of options available to choose from. A business owner should choose the NBFC that meets all their specific requirements.