The small and medium-scale business sector in Delhi produces a massive amount of employment and contributes significantly to our country’s GDP. Small businesses grow at a fast pace would definitely help curtail the country’s economic divide with another first world (developed countries). For a small business to grow, there are a few prerequisites that should be satisfied by the business owner. In the metamorphosis period of any business, be it small or big, it needs mainly the following three things:
Constant Cash Inflow: any business needs a constant inflow of cash so that the business operations do not stop and production is constant. This inflow of cash is made available in the form of small business loans from banks or NBFCs.
Inexpensive Machinery for Production: a business at its initial starting phase needs inexpensive machinery or equipment to make productions profitable. It helps in reducing the production cost as the operational cost reduces. Consequently, it will ultimately lead to small businesses getting small business loans easily.
Skilled Labour: in order to make a business function efficiently, there is a need for skilled labor and workforce to make the production easy and profitable. Our country is blessed to have skilled labors in abundance. So getting the labor for a business is not the hardest part but undoubtedly imperative.
Small businesses always require cash to be pumped into the organization. It leads the momentum to be stable and that no jerk is faced during the business journey. The cash is mainly made available in the form of capital funding or business loan funding from different financial organizations. These are mostly banks, private lenders, or informal lenders. In the past, NBFCs or Non-Banking Financial Companies have outshined banks solely due to their flexible and lenient nature. In the coming part, we will be discussing why and how to apply for an MSME loan.
Features of Bank Loans
- Banks sanction loans in the range of somewhere between 3 lakhs and 25 lakhs.
- The duration for which loans are sanctioned by banks is between one year and five years.
- Banks don’t offer loans to businesses which don’t provide any collateral asset.
- The rules and regulations of the banks make the business loan a hectic process.
Features of Business Loans from NBFCs
- NBFCs sanction loan in the range of somewhere between 1 lakh to 5 lakhs.
- The duration for which loans are sanctioned by NBFCs is between 1 year and two years.
- NBFCs provide convenient and doorstep services to its customers.
- NBFCs don’t require any collateral asset in order to approve a loan.
Getting a business loan from a bank is difficult compared to an NBFC. This is because banks usually do not sanction loans to business with a bad history of debt and credit score. Whereas, NBFCs consider every application irrespective of their credit score.
The main hurdle that small businesses face is that they don’t have much to offer as collateral and if they fail to repay the loan their only hope of getting another loan and saving their business is lost. That is why businesses are reluctant towards loans that require collateral. With business loans from banks, the amount of loan depends on the value of the collateral offered. This makes loans from banks an unpopular option amongst the small business in India. On the other hand, NBFCs offer loans without any collateral requirement. Subsequent loans are also given by NBFCs which helps small businesses grow rapidly in India.
Loans offered by NBFCs have the following advantages:
- Fast: business loans offered by NBFCs are processed really fast to make capital available to small businesses in no time. Once the application is approved, the loan amount is disbursed within 72 working hours.
- Collateral-free: loans offered by NBFCs are collateral-free, which makes it a popular option amongst SMEs and MSMEs.
- Transparent:there are no hidden charges in business loans offered by any NBFC, and transparency is always maintained throughout the tenure.
- Minimal Documentation: very less amount of paperwork is required to avail a loan from NBFC.
All the advantages make NBFCs a good and hassle-free choice for business loans. The rate of interest is also reasonable, which would not burden small businesses with huge debt if they are unable to pay on time. This is why NBFCs are gaining so much popularity among small business owners in India. These business loans offered to small business are ultimately helping the small businesses to grow. Eventually, our countries’ economy would also grow,and that is why is encouraged to be taken as an option when looking for a business loan in India.
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