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Business loans uncovered: Choosing between NBFCs and banks

Want to apply for a business loan but want it in a short period of time? Find out which lender to choose for your financial needs.

business loan online from nbfc india

In the dynamic and unpredictable world of business, the requirement for capital remains constant. Businesses frequently require financial aid for several reasons, including but not limited to starting up, establishing operations, or filling cash flow gaps. When it comes to expanding and succeeding, this is where business loans step in, acting as a lifeline for companies.

In this context, NBFCs perform a key function. In India’s banking system, non-banking financial companies have established a distinct niche. Numerous companies now turn to them when they need funding. A more simplified and adaptable approach to lending makes NBFCs appealing to businesses, as opposed to conventional banks.

This article will compare the business loans given by NBFCs to those given by regular banks and other lending organisations.

Understanding business loans

Businesses have a wide range of financial needs, and business loans are tailored to meet those needs. A business loan is crucial in helping a company reach its goals, whether to expand operations, manage cash flow, or buy any equipment for operations.

The most basic definition of a business loan is a sum of money that a company or individual uses to fund their business operations. It is the borrower’s responsibility to repay the principal and interest on the loan within the agreed-upon time frame. A loan agreement normally lays out all of the criteria and terms of the loan, such as the repayment date and interest rate.

There are several options accessible today for obtaining business loans. Historically, many companies have relied on traditional banks for funds. However, Non-Banking Financial Companies (NBFCs) have recently arisen as an alternative for businesses. 

Corporations are increasingly taking business loans from various banks and NBFCs to meet their unique requirements.

NBFCs vs traditional banks

In order to fulfil the lending needs of businesses, the financial ecosystem relies on both traditional banks and non-banking financial companies (NBFCs).

Businesses can get loans from traditional banks, which have been around for a long time and provide several services. Businesses frequently choose them first because of their credibility, vast network, and the fact that the central bank regulates them.

On the other hand, NBFCs provide banking services but do not hold a banking licence. In recent years, they have become more popular due to their customer-centric approach and adaptability.

Borrowing money from traditional banks or non-bank financial companies (NBFCs) both have their benefits and drawbacks. One major perk of getting an unsecured business loan from NBFC is how quickly and easily you can get it approved. 

It is easier for businesses to qualify for loans from NBFCs because their eligibility criteria are often less strict than those of traditional banks. Businesses that need money quickly may find the expedited loan approval process lifesaving.

Also read: The best banks in India: Leading the way in finance

Eligibility criteria

Traditional banks and NBFCs use different criteria to determine who can get a business loan. A solid business plan, collateral, and a stellar credit history are often the requirements set by traditional banks. Additionally, they might ask for comprehensive financial records and evidence of past success.

The adaptability of NBFCs stands in sharp opposition. Credit ratings are one factor, but they also look at the company’s health and future prospects. Because of this all-encompassing strategy, they are able to assist a broader variety of companies, including startups and SMEs.

Interest rates

Interest rates play a crucial role in business loans since they establish the cost of borrowing money. These are the expenses that come with taking out a loan.

As a result of their access to cheaper funds, traditional banks typically offer business loans at lower interest rates. Nonetheless, certain companies may find it challenging to obtain bank loans due to the strict financial qualifying requirements.

Conversely, NBFCs provide more leeway and faster loan approvals, but they typically charge higher interest rates. Because of this, NBFCs are a good choice for companies that prioritise convenience over reduced interest rates when seeking funding.

Also read: The pros and cons of investing in floating-rate fixed deposits

Loan disbursal process

Differences exist between conventional banks and NBFCs in the way loans are disbursed. The extensive verification processes banks use often add extra time to the process, sometimes taking days or weeks.

On the other hand, NBFCs have a reputation for swiftly disbursing funds. Because of their digital platforms and simplified procedures, loans from NBFCs can frequently be disbursed within a few days or even the same day. Businesses in dire need of capital may find this efficiency and speed to be an absolute blessing.

Digital loan processing

The financial industry has also been profoundly affected by the introduction of digital technology. Digital loan processing is becoming more common, especially among NBFCs, which is a notable change.

Business loans online from NBFC India is a service that NBFCs have introduced to streamline the loan application and approval procedures. Companies now have the option to apply for loans online, attach supporting documents digitally, and receive fast loan approvals. Paperwork is reduced, time is saved, and efficiency is increased through this digital process.

The process is slower at conventional banks because customers still need to bring in physical documents and be verified in person. Still, in an effort to maintain a competitive edge, a number of banks are progressively embracing digital procedures. 

Pre-approved loan limits

Many NBFCs provide a service that is unique in the industry: pre-approved loan limits. It is a way for NBFCs to pre-approve a certain amount of loans to businesses, depending on their creditworthiness and repayment history. The company can use this pre-approved limit whenever it needs to.

The benefits of pre-approved loan limits for businesses are manifold. 

  • With this, companies can rest assured that they will have the capital they need to meet their urgent obligations.
  • Businesses can borrow just what they need, and interest is only charged on what they use, giving them much flexibility.
  • It’s a time saver because companies can get the money they need quickly without waiting for the long loan approval process.

Further reading: Debt management: Advanced strategies for paying off debt quickly 


Business loans are a crucial part of the dynamic financial landscape, and both conventional banks and NBFCs play significant roles. 

While banks have always been there for their customers, NBFCs have shown to be more adaptable and customer-focused. Indian businesses are finding new ways to access capital thanks to NBFCs and their digital loan processing, flexible eligibility requirements, and fast loan approvals. 

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StockGro Team

StockGro is India’s first and largest ‘Social Investment’ platform aimed at helping you master the art of “Trading & Investment”. Trade, Invest and get rewarded to Learn everything about ‘Investments’ the fun-filled way.

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