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A Secured Business Loans in India can be taken from Banks Non-Banking Financial Companies (NBFCs). While banks are much safer to avail Secured Business Loan, NBFCs are also getting popular for their quick loan disbursements. Read on to figure out whether you should choose a bank or an NBFC to avail the loan.
NBFCs provide financing services registered under the Companies Act, 1956 or Companies Act, 2013. NBFCs in India offer loans to individuals, companies, and partnership firms and work like banks. The main difference between banks and NBFCs is that the NBFCs cannot issue demand drafts and cheques like the banks.
Below are the primary differences between an NBFC and a bank:
|
Parameters |
NBFCs |
Banks |
|
Type of entity |
Privately-owned entities |
Authorised by the Government of India. |
|
Regulations & Act |
Fall under the Companies Act, 1956 |
Fall under the Banking Regulation Act, 1949. |
|
Foreign Investments |
Allow foreign investment up to 100% |
Allow foreign investment up to 74%. |
|
Reserve Ratio |
Don’t have to maintain reserve ratios |
The Reserve ratio is compulsory for banks only |
Let us understand which one out of NBFC and bank would be a better option for you to avail a business loan based on the following parameters:
Because of their simple eligibility criteria, you can get a Secured Business Loan from NBFCs easily as compared to banks.
The Secured Business Loan interest rate is fixed and regulated by the RBI. So, the banks cannot give business loans below a particular Secured Business Loan rate. However, it can be flexible and competitive with NBFCs. For the best interest rates, you can choose to apply with a small finance bank.
Banks follow strict paperwork process. However, paperwork and formalities are minimal when you avail a Business Loan from NBFCs.
To avail a Secured Business Loan from a bank, you need to have a good credit score while you can get an SME business loan from NBFCs even when your credit score is not that good. But loans offered on low credit scores generally charge higher interest to balance out the risk of defaulting.
When you apply for a secured business loan from an SFB or a bank, your lender does a credit evaluation to approve your loan application. On the other hand, NBFCs rely on many factors other than credit score to determine your creditworthiness.
Banks offer the best Secured Business Loans but follow lengthy loan approval and sanction processes. Alternatively, NBFCs offer business loans easily and quickly.
NBFCs disburse loans faster than banks due to their minimal formalities and less documentation. Banks follow a stringent loan disbursement process, which is the reason why it is more time-consuming.
Banks as well as NBFCs all are great options to get Business Loans in India. But as the banks and SFBs are more traditional and stringent, they are a reliable source to finance your business needs. You can avail the best Secured Business Loans to start a new business, maintain or expand an existing business or to finance your supply chain from AU Small Finance Bank. We offer Secured Business Loans for small and medium enterprises to cater to your varied financial needs.
