A total of 6.33 crore MSMEs exist across India, playing a pivotal role in driving India’s economy. Since micro-small-and-medium enterprises (MSME’s) are well-poised to benefit from India’s massive consumption and production potential, they have the potential to grow immensely if supplied with the right credit facilities. However, despite the potential, MSMEs in our country find it difficult to expand operations due to a lack of access to capital through credit, because they don’t have the collateral or documents necessary to acquire a business loan. In some cases, MSMEs are unable to get the required funds on time due to the extremely lengthy loan application processes of traditional banks. Transforming Business Loan-
Non-banking financial companies (NBFCs) have been acting as the economic pillar of support for many small businesses in recent years. According to Statista, a total of 9,507 NBFCs have been registered with the RBI since the end of January 2021. NBFCs play a critical role in ensuring financial inclusion and expanding the loan prospects for MSMEs. In this article, we will focus on how NBFCs have evolved over the years to become a prominent part of the Indian financial services sector. Furthermore, we will explore the offerings of NBFCs for small businesses and how you, as a small business entrepreneur, can choose the best one to finance your enterprise and Transforming Business Loan.
The Evolution of NBFCs
Over time, NBFCs have undergone a significant transition to become the preferred choice for business loans, especially for small business owners. The regulatory frameworks have become more stringent and made NBFCs rational and more efficient.
The amendment of the RBI (Amendment) Act, 1997, increased the scope of operations for NBFCs and sped up their technological transformation. The past 20 years have witnessed NBFCs become a prominent part of the Indian financial services landscape, notably after the union cabinet opened the doors for foreign direct investment into regulated NBFCs in August 2016.
How NBFCs are Transforming Business Loan Prospects for MSMEs
There are a variety of ways in which NBFCs are expanding the scope for MSMEs to acquire business loans in the country.
- Credit underwriting: The flexible eligibility criteria have been one of the significant reasons NBFCs have been regarded as the foremost choice for small business owners. While formal banks rely heavily on credit scores, NBFCs have a relatively lenient process and can be leveraged by those with lower credit scores or no credit history.
- Disbursal: Opting for business loans from formal banks involves extensive paperwork and a verification process that takes a significant amount of time before loan disbursement. NBFCs, on the other hand, have a seamless application process that leads to quick approval and early disbursal.
- Digital processes: Technological advancements have allowed NBFCs to shift their business loan application process online. Applicants can check their loan eligibility, upload documents, get queries addressed, and get loan approval through the website or smartphone application.
NBFCs for Small Businesses
Unlike traditional banks, NBFCs have the flexibility to cater to a wider section of borrowers. They offer simpler application processes and ensure quicker approval and disbursal as well, which enhances the scope for small businesses to get a timely business loan.
MSMEs refrain from taking loans from formal banks or fail to do so due to a variety of reasons such as:
- Extensive paperwork
- Rigid regulatory norms
- The need for collateral
NBFCs, on the other hand, offer various benefits to small businesses to acquire a business loan in no time. Some of these benefits are as follows:
- NBFCs can disburse the loan amount faster than banks.
- They can customize their offerings to align with the business loan requirement
- Less paperwork is required, and there is no need for collateral
Opting for the Right NBFC for Your Business
Choosing the right NBFC for your business can be an arduous task, especially considering the number of options available in the market. Make sure the NBFC you opt for has an online application process, is registered with the RBI, has flexible eligibility criteria, and does not require you to pledge any assets as collateral.
Leading NBFCs like Kinara Capital provide you with a 100% digital loan application process that can be completed from their website or smartphone application. Their exceptional customer support ensures all your business loan queries are addressed so that the process to loan application and disbursement is smooth and hassle-free.