Banks or NBFCs: Which is better for Business Loan?

by | May 7, 2020 | 2 comments

By Author: Diksha Sharma

Today’s markets have opened up, and the governments also lend their support to SMEs through various loan schemes. Moreover, there are a variety of options to choose from to get a loan for business. However, out of all the options available, business owners often get stuck between a bank and NBFC. In this article, we have densified both financial institutions to help entrepreneurs make an informed decision keeping their business’ requirements and goals in mind.

Before choosing between banks and NBFCs for a business loan or any other loan, it is important to have clarity on both financial intermediaries. NBFC, Non-Banking Finance Company provides banking services without a banking license or any additional legal agreement. NBFCs are privately owned entities and are supposed to get registered under the Companies Act 1956 to provide services similar to that of banks.

On the other hand, banks accept deposits from the public and create credit. Moreover, banks can perform lending activities directly or indirectly through capital markets and can manage financial services and products generally authorized to them. One of the major differences between banks and NBFC is that the former can accept demand deposits, whereas the latter can only lend or invest.

In recent times, banks are struggling with bad loans which have given way to NBFCs as they are not strictly regulated by banks and offer greater convenience and faster approvals on the application. Furthermore, when it comes to availing an instant business loan, NBFCs can provide a better deal than traditional banks.

Here are a few reasons:

Interest Rates
Bank loans are typically linked to the MCLR and several other macro-economic factors such as RBI lending rates and the international market. Whereas, NBFC provide loans based on the PLR, which is not regulated by any government entity and hence has the freedom to increase or decrease the loan interest rates as per the requirement.

The loan eligibility differs between bank and NBFC as it is not regulated tightly as banks, NBFCs can sanction amounts higher than banks. Further, banks don’t fund the entire credit needed and fund only a certain portion, and the rest has to be paid by the borrower. However, NBFCs can always find out ways to help borrowers attain the whole business loan.

NBFCs have a good share of business loans in their books because of this reason. Most people turn to NBFC business loans because of the minimal documentation and paperwork while banks can be stringent when it comes to approval of the documents. However, NBFCs offer a hassle-free process to help borrowers secure a loan as fast as it can be.

Finance is the basic need of every business and NBFCs help cater to all the sections of the society. One of the leading digital NBFC, Clix Capital, is the most trustable one as it ensures quick processing, approvals, customized repayment methods resonating with business’s goals. Moreover, No business ambition is too big or too small. Whatever be the requirement, the business expansion loans from Clix Capital have got it covered. One can embark their entrepreneurial journey and fund both expansion plans and regular working capital needs.

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  1. Business Loan India

    Informative post!

    People those are looking to apply for a business loan for their firms and industries can visit and check the eligibility criteria and get a secured and unsecured business loan within a week

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