The Make in India initiative by the government is helping the SMEs in India in growth and development. Small and Medium Enterprises are fuelling the growth of India’s economy. MSMEs undoubtedly play a vital role in the country’s economy. But they still have a lot of scope for improvement.
Technology plays an important part in the growth of micro and small enterprises. However, they also require a free flow of working capital to run and operate efficiently. Notably, working capital is also required to get access to technology as well. The Indian government has taken several steps to boost credit lending for SMEs. However, they still face a lot of
FinTech companies are gaining a lot of progress among the borrower as a more and easily accessible option compared to conventional banking and payment options. FinTech companies use tools, programming, and technology to improve and upgrade proficiency, responsibility, and speed. Let’s take a look at the best options from where an SME owner can avail a loan.
A bank loan is the most common type of loan availed for business. Banks generally provide long-term business loans with a fixed repayment period of say 3, 4, or 10 years. Banks are the traditional lenders that most business owners assume to be the best in the market. However, they have a lengthy loan process where the borrower needs to wait for a long (sometimes a month) to get his application processed and approved. Additionally, the business owner has to visit the bank branch to fill the loan application personally.
The banks require security to grant a business loan. They are generally not willing to take risks and therefore, require the SME owner to provide collateral to back the loan amount. Big companies and business owners can hypothecate security. However, MSMEs owners are generally not in a position to provide security, and therefore, they find it difficult to avail a
NBFCs or Non-banking Financial Companies are the FinTech Companies that offer instant business loans. They are a technology-enabled platform that offers SME loans at comparatively easy terms and conditions. NBFCs offer business loans online wherein the applicant can apply for the loan online. He can also upload the soft copies of the required documents online.
NBFCs have fast processing where they approve the application and disburse the loan amount within a few working days. Also, they have easy eligibility criteria. They only require the MSME to have filed ITR of more than Rs. 1.5 lakhs in the previous year, business turnover of more than Rs. 5 lakhs, and business vintage of more than two years. Additionally, they require minimal documentation- PAN, ITR, bank statement, and address and identity proof. With such benefits, NBFCs have become the best option for business lending.
The above mentioned two are the best options to avail of a business loan in India. However, with the mentioned benefits of availing an NBFC business loan, an NBFC has become the preferred choice of most MSME owners.