Exploring NBFCs as an Alternative Source for MSME Loans

NBFCs (Non-Banking Financial Companies) are financial institutions without a banking license. Licenses from institutions can help entrepreneurs procure business loans. However, most entrepreneurs face several hassles when getting MSME loans. Industry professionals acknowledge that MSMEs face numerous challenges when accessing formal credit scores from banks or other formidable financial institutions.

Entrepreneurs heading start-ups generally recognise that businesses have fewer assets, while some must comply more with financial requirements. Start-ups sometimes require complicated documentation, while most financial institutions have lengthy processing time; however, as entrepreneurs, you need to take care of low credit score/s as it can affect your creditworthiness. In this context, NBFCs can provide many advantages as entrepreneurs can process their loan applications easily.

Exploring MSME Loan Options

Most entrepreneurs in the national economy look to expand their businesses by utilizing, besides making loan applications physically, online business loans. Consultants from the banking industry state that the process of making loan application/s might vary from one financial institution to another.
One of the major advantages that NBFCs offer in this regard is flexibility for procuring business loans. For entrepreneurs, making a business loan application through NBFC is always advisable, as you can enjoy the advantages. Besides offering customized loan solutions for start-ups, an entrepreneur might get to procure working capital loans, or even unsecured loans, for that matter of fact.
NBFCs precisely use data analytics and alternative credit score strategies to assess MSMEs’ credit and repayment situation. The major benefits of NBFC loans are:

  • No collateral requirements
  • Simple documentation
  • Quick processing time
  • Flexible credit criteria
  • NBFCs Empowering MSMEs

Micro, Small, and Medium Enterprises in India contribute significantly towards the growth of the national economy. Generating significant employment within the country, MSMEs contribute largely to the growth of development exports. The expansion of business remains a responsibility for entrepreneurs, as financial experts reveal that NBFCs have become alternatives to traditional financial institutions to support MSMEs. NBFCs can help MSME businesses through the following:
Offering tailor-made: NBFCs provide a wide range of products and services tailored to the needs of MSMEs, such as working capital loans and term loans.

Online processing of business loans: NBFCs adopt the latest technologies, such as AI, machine learning, big data analytics, etc., to enhance the efficiency of work processes. Technology reduces overall business loan processing costs, improves customer service, etc.

Focusing on under-served segments: NBFCs have a strong presence in rural and semi-urban areas, where banks have limited penetration and outreach. In such markets, NBFCs offer collateral-fthese communities ree loans, low-interest rates, and flexible repayment options to these, financial inclusion while bringing start-ups within the main stream.

Factors to Consider When Choosing NBFCs

There are many factors to consider when opting for NBFCs for financial services. Some of them are:
Flexible Interest rates: NBFCs usually charge higher rates than banks, as they have better operational expenses and risk exposure. Therefore, it’s very important to evaluate the rates of different NBFCs and negotiate with them.

Fees: NBFCs may impose various added fees on their loans, such as processing fees, documentation fees, service tax, etc. Therefore, it is vital to check every NBFC and choose the brand with the processing charge.

Eligibility criteria: NBFCs have more lenient eligibility criteria than banks, as they do not rely solely on the financial borrower’s statements, credit scores, or collateral of the borr It is easier to qualify for a loan from an NBFC, especially if the entrepreneur one has a low credit score.

Documentation and verification: NBFCs have simpler and faster documentation and verification processes than banks, as they use digital platforms and technologies to streamline loan application and approval procedures. Therefore, it is more convenient for entrepreneurs to apply for a loan from an NBFC. Online processing of an MSME loan can also be done depending upon the entrepreneurs’ prerogative.

Speed of Loan Disbursal: NBFCs have quicker disbursals than banks, as they have less bureaucracy within processes and more flexibility in decision-making.


Regarding MSME loans, NBFCs can bring in some of the best financial packages across India. Due to flexible repayment tenures based on the entrepreneurs’ eligibility, NBFCs offer various solutions to support the growth of MS MEs nationwide. To learn more about it, hold online brochures of NBFCs stating clearly the norms that havRMS has laid down. NBFCs have been the best choice for entrepreneurs, especially those who run start-up mod start-regional markets.

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