Why choose NBFCs for Unsecured Business Loans in India?

What is an unsecured business loan in India?

An unsecured business loan is the money you borrow from a lender for your business. In this, you don't have to pledge any collateral as security, and you can repay the loan as Equated Monthly Income (EMI). But what does the lender check before approving these loans?

Your credit history, repayment capabilities, and income become checkpoints for the lenders. Borrowers can get unsecured business loans for business expansion, machinery upgrade, funding working capital, solving cashflow problems, etc. Before applying, check your credit score to see whether you're eligible for a collateral-free loan or not.

Typically, you will find a few common types of unsecured business loans. Let's understand these types of unsecured business loans.

Read Also: How to Improve Your CIBIL Score Quickly – A Complete Guide

Types of Unsecured Business Loans

There are various credit instruments that do not require collateral. Here we will discuss a few common ones:

Term Business Loan: These are short-term business loans, taken to fulfil business needs within a shorter timeframe. The term loan comes with up to a 4-year repayment tenure. You can get high-value business loans without collateral, a guarantor, or any other security.

Overdraft (OD) Facility: In an OD, lenders allow you to borrow sums of money from your business accounts, such as your current account. With this line of credit, you pay interest on the amount you have utilized for various purposes.

Government-backed financing schemes: The Government of India has taken multiple steps to stabilize and formalize the MSME sector over the last few years. The Make in India movement and Udyam registration were the key aspects of building MSMEs in India. To encourage more individuals to pursue their business dreams, the Government of India has rolled out numerous credit schemes such as the Pradhan Mantri MUDRA Yojana (PMMY), Stand-up India, and Credit Guarantee Schemes (CGS).

Read Also: 8 Types of Business Loan in India

5 Reasons you Should get Unsecured Business Loans from NBFCs

A collateral-free loan is a category where MSMEs can get hassle-free business loans without requiring collateral as security. NBFCs offer a more convenient and effortless route for securing such loans. Here are the 5 reasons why NBFCs should be your first choice:

1. Minimum Documentation & Approval Process

NBFCs have slightly more relaxed eligibility criteria as compared to banks. These institutions leverage technological advancements to provide a convenient documentation process that brings down the required time. Once the documentation is completed successfully, the status of your application is determined within a few hours.

2. Faster Loan Disbursals

NBFCs are equipped with a stronger tech stack, which enables them to process documents and eligibility faster. With relatively relaxed eligibility criteria and a tech-friendly nature of service, your loans get disbursed faster.

3. Customised Business Loan Solutions

Business loans from banks come with numerous restrictions, making it difficult for entrepreneurs to make the most of that loan. However, with an NBFC, small business owners can decide where they want to invest to ensure the growth of their business. They can use the finances to buy inventory, raw material, machinery, or to upgrade infrastructure and expand to a broader target audience.

4. Less Stringent Eligibility Criteria

The eligibility criteria for unsecured business loans often require a high credit score (675 or above), a long business history (4-5 years), and a high minimum annual turnover. NBFCs, on the other hand, are often more flexible with eligibility criteria, opening up more opportunities for business owners to get the loan.

The interest rates are also competitive to ensure that all businesses get an equal opportunity to grow.

5. Focuses on Inclusion

NBFCs are catering to an underserved audience, the MSMEs. It is important to understand that MSMEs contribute to over 30% of India's GDP. Therefore, these entities operate to help most businesses grow and fund them with stringent eligibility criteria and hassle-free approval methods.

If you are ready to expand your business, apply for an unsecured business loan today and take the first step toward growth.

Quick Comparison: NBFC vs Bank for Unsecured Business Loans

Here is a quick comparison between NBFCs and banks for unsecured business loans, highlighting key differences in eligibility, documentation, processing time, and customer focus.

NBFCs for unsecured business loans are a good choice in most cases because:

• They specialize in lending, hence they have a holistic view of the client's needs for the product.
• MSMEs are a financially underserved category, and NBFCs are serving the category that contributes to around 30% of GDP growth, overall.
• NBFCs offer a relatively more straightforward application process, faster disbursal, and more relaxed eligibility criteria.

How to Apply for an Unsecured Business Loan?

To apply for an unsecured business loan from an RBI-registered NBFC, follow these simple steps:

1. Visit Ambit Finvest's official website.
2. Click on the 'Apply Now' button at the top.
3. Select the unsecured business loan option.
4. Fill in all the essential information in the application form.
5. Wait for a representative to contact you and discuss your requirements.
6. Upon approval, the loan amount will be disbursed directly into your preferred account.

Business loans without collateral can act as a boon for business owners who want to expand their businesses or look at growth opportunities. NBFCs offer flexibility with respect to process and approvals.

Evaluate your options from all perspectives and make a decision that will help you become successful and bring more growth opportunities. Use the loan responsibly to grow your business faster.

Frequently Asked Questions (FAQs)

Can NBFC give unsecured business loans?

Yes, NBFCs provide unsecured business loans typically up to ₹30 to ₹50 lakh, though the exact limit depends on the lender. For example, Ambit Finvest offers loans up to ₹50 lakh.

Why do people choose NBFC over banks?

People prefer NBFCs for business loans because they offer a simpler, mostly digital application process, minimal documentation, and faster approvals compared to traditional banks.

What are the benefits of taking a loan from an NBFC?

NBFC loans offer flexible eligibility, easy application, minimal paperwork, faster processing, and often include a dedicated relationship manager for personalised support.

Which NBFC is best for business loans?

The criteria for being the best NBFC can differ from one requirement to another. Someone might find NBFC A to be the best, and someone else might find some other. In general terms, the best NBFCs are the ones that:

• Offer a more flexible application process and a convenient
• Regulated by the RBI
• Offers more relaxed eligibility criteria to promote financial inclusion

Is it safe to take a loan from an NBFC?

Yes, it is 100% safe to take a loan from an NBFC. But you should be aware of the NBFC you choose, and it should be registered under and regulated by the RBI.

Who is eligible for unsecured business loans?

Business owners with at least 2 years of operational history and a good CIBIL score (typically 675 or above) are generally eligible for unsecured business loans. Eligibility criteria vary by lender and include submitting necessary financial documents and identity proofs. NBFCs and banks may have different requirements, so it's important to check with the specific lender.