Non-Banking Financial Companies (NBFCs) have made a significant contribution to the country’s economic empowerment and financial inclusion. Since most of the MSME segment lack formal papers and impressive credit history, NBFCs have stepped in to fill the gap left by the regular banking sector, which lends based largely on these factors. Furthermore, banks’ strict rules and restrictions sometimes deter MSMEs from using financial services. Therefore, NBFCs place a premium on getting to know their consumers and providing simple, low-documentation financing solutions.
However, before MSMEs apply for unsecured loans for business, it is crucial to do some research.
Here’s the checklist to go through before applying for unsecured loans for your business:
Interest rate is the most important consideration in obtaining unsecured loans for business since even a few percentage points can make a significant difference in the EMI. As a result, MSMEs should do a thorough market analysis and compare the rate of interest given by 8-10 NBFCs. Interest rates depend on the type of loan, whether it is with or without collateral.
It is critical to avail of a loan from an NBFC that is registered with the RBI. Business owners should check the registration number and other required documents as well. It is also important to go through the client reviews and testimonials. There are a few trusted NBFCs like Kinara Capital that are RBI registered. You can check out their registration number and other details on their website. They provide unsecured business loans within one day if all the documents shared by MSMEs are approved.
While focusing on interest rates and other financial terms, MSMEs overlook the NBFC lender’s customer interface. Imagine having to go to the branch every time you want loan information or want to amend your office location in the lender’s records. A lender that provides these fundamental services through a seamless digital platform will offer far more convenience than one who still uses copybook processes.
A company’s financial demands can change rapidly. As a result, having some additional financial buffer, such as an overdraft facility or a line of credit, is preferable. However, SMEs frequently choose the first lender willing to put funds into their account at a reasonable interest rate, and such benefits are generally overlooked.
The way forward
Customer-centric and transparent processes would enable a more fluid transactional ecosystem based on trust, which would help both sides eliminate variations and uncertainties. In addition, NBFCs would reach out to a wider network and drive financial inclusion if they have a culture of developing trust. Borrowers with a solid payback track record and credit behaviour are often rewarded to encourage financial discipline among the target customers.
MSMEs must maintain proper documentation and go through the eligibility checklist before applying for unsecured loans for business. This will reduce their chances of rejection and save time.