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Everything you need to know about NBFC business loans

NBFC business loans are often lifesavers for MSMEs who cannot secure traditional bank loans

nbfc business loan

For many MSMEs in India, going through the application process of a bank loan is a very daunting task. Stringent eligibility criteria, complex documentation processes, and limited collateral options often leave them locked out of crucial financial help they need to grow.

This is where NBFCs come into play. These corporations help MSMEs secure loans that they otherwise wouldn’t have been able to get.

What are NBFCs?

You can think of Non-Banking Financial Companies (NBFCs) as financial institutions like banks, but without a full banking licence. They offer a wide range of financial products and services, including business loans specifically designed for MSMEs. 

NBFCs are regulated by the Reserve Bank of India (RBI), which means that they also operate under a certain code of safety and standardisation.

You may also like: The best banks in India: Leading the way in finance

Why NBFC business loans might be more beneficial to you

While bank loans are usually the top choice for all business owners, here are some unique advantages NBFCs can offer you:

  • It’s easier to be eligible for an NBFC business loan: NBFCs often have less stringent eligibility criteria compared to banks. They may consider factors like business potential, cash flow, and digital footprints alongside traditional metrics like credit history. This makes them more accessible to startups and young businesses that have limited track records.
  • Faster approval: NBFCs usually cater to small businesses, and are used to having limited data to process applications. Having been adapted to streamlined processes, turnaround times are very low for NBFC business loans. This is often a make-or-break factor for MSMEs that urgently need capital to pay for raw material or deal with a liquidity crisis.
  • Wider range of financial products: NBFCs often offer a wider variety of loan products like secured and unsecured loans, working capital financing, equipment financing, and invoice discounting, catering differently to different needs that a smaller business might face. This also makes NBFCs a one-stop solution for all MSME financing needs.
  • Tailored solutions: Oftentimes, NBFCs will also understand specific business constraints and tailor loan products that cater to the business’s exact needs. This flexibility is rarely available at big banks, especially for smaller businesses.

Also read: Credit history: What is it and why it matters?

Securing an NBFC business loan in India

Here are some things you need to keep in mind to secure a suitable NBFC business loan in India:

  • Make sure you research your options and don’t choose the first NBFC that comes to mind. Explore different options and compare their loan offerings specific to your situation. Make sure to ask them about their hidden fees and eligibility criteria early on so you’re not in for a surprise later. Websites like Paisabazaar and BankBazaar can help you compare providers easily.
  • Be clear about what you’re looking for, including the purpose of the loan, how much interest you can afford to pay, and how long you want the money for.
  • Prepare your documentation well ahead of time so that you’re all ready to go when your eligibility is being assessed in detail. These could include anything from financial statements and registration papers to bank statements.
  • Assess your credit score and make sure that you are above the minimum credit criteria for an NBFC business loan. If you’re not, you could read about several ways in which you can improve your credit score.
  • Negotiate, negotiate, negotiate. If you’re approved, make sure you squeeze every percentage point possible on your loan. While it won’t matter a whole lot to the NBFC, a percentage lower than the offer can go a long way for you, especially as a small business.

Also read: Managing Business Finances Effectively

Always remember to:

  • Do your due diligence and read the fine print. Understand all terms and conditions, including hidden charges, prepayment penalties, and foreclosure clauses, before signing the agreement.
  • Stay in touch with your relationship manager at the company throughout the process and don’t hesitate to ask questions if this is your first time securing a business loan.


NBFCs have emerged as a powerful alternative to traditional banks, offering flexible and accessible business loan solutions for MSMEs in India. By understanding their benefits, eligibility criteria, and application process, you can leverage NBFCs to borrow timely capital and grow your business without having to compromise on interest rates. 

NBFCs are important to the MSME ecosystem not only because they provide capital, but also because they have several other financial products that can help you grow your business in ways you couldn’t before. 

Remember, however, that careful research can go a long way. Good luck!

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Devansh Sinhal

I am passionate about stock investing and have a knack for simplifying complex market concepts. Providing readers with valuable insights and empowering them to make informed investment decisions is my jam.

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