The annual interest rates for an unsecured business loan from NBFCs typically range from 15% to 24%.
NBFC Business Loan- Interest Rates, Eligibility, How to Apply
The term NBFC stands for Non-banking Financial Company and can be a great alternative to traditional banks in case you want to avail a business loan. NBFCs offer an ample number of loan options followed by quick approvals and minimal documentation. For this reason, they are increasingly becoming popular with more SMEs turning to NBFCs for their credit requirements. Read on to discover more about NBFC Business loan for businesses, including loan eligibility, required documents, interest rates, and more.
NBFC Business Loan – Explained
An NBFC business loan is a type of business loan provided by a non-banking financial company (NBFC) rather than a bank. An NBFC, as per the Companies Act, of 1956, is a registered company primarily involved in activities such as providing loans and advances, acquiring shares/stocks/bonds/debentures/securities issued by Government or local authority, leasing, hire-purchase, insurance, and chit business.
However, an NBFC does not include institutions whose main business revolves around agricultural or industrial activities, buying or selling goods (excluding securities), providing services, or dealing in immovable property.
Features & Benefits – NBFC Business Loan
If traditional banks cannot fulfil the credit requirements of small businesses, then NBFCs can offer assistance by providing NBFC Business Loans. Here are some of the features and benefits of availing NBFC business loan;
Features
- Simplified Lending Procedures: Unlike banks requiring extensive paperwork and collateral for loan approvals, NBFCs offer loans with comparatively less hassle. NBFCs have become the preferred choice for SMEs due to their lenient lending norms, sometimes not even requiring collateral.
- Instant Pre-Approved Loan Limits: NBFCs provide businesses with a pre-approved loan limit, allowing them to access funds as needed without multiple approvals. Businesses are only charged interest on the amount they use from the sanctioned loan limit, unlike banks that require repayment of the entire amount.
- Flexible Loan Options: NBFCs offer flexible repayment options, such as interest-only payments with the principal amount due at the end of the loan term. This flexibility reduces the monthly installment burden, making NBFC loans more manageable for businesses.
Benefits
- Interest rates typically start from 9.75% per annum.
- Loans are typically available for loan amounts ranging from INR 50 Lakhs to INR 100 Crores.
- Loan sanction periods range from 1 year to 5 years.
- No security or collateral is required for loan approval.
- A service fee of up to 4% is applicable.
Also Read: Secured vs Unsecured Business Loan: Know Differences [2024]
Interest Rate – NBFC Business Loan
The interest rate is what the borrowers look for when choosing a lender, as it directly affects the monthly EMIs. Business loan interest rates typically vary slightly between banks and NBFCs, with public sector banks usually offering the lowest rates.
The interest rates of business loans provided by NBFCs are given below:
| NBFC | Loan Amount | Tenure | Interest Rates (p.a) |
| Tata Capital | Upto INR 75 Lakhs | Upto 5 Years | 15% |
| IIFL Finance | Upto INR 30 Lakhs | Upto 5 Years | 11.25% – 33.75% |
| Lendingkart | Upto INR 2 Crore | Upto 3 Years | 12% – 27% |
| Bajaj Finserv | Upto INR 55 Lakhs | Upto 8 Years | 9.75% – 25% |
| Aditya Birla Finance Ltd. | Upto INR 1 Crore | Upto 2 Years | 18% to 24% |
| Hero Fincorp | Upto INR 40 Lakhs | Upto 5 Years | 15% – 30% |
Other Charges
To secure a business loan from an NBFC, the borrower is typically required to pay several fees, including:
- Loan processing fee
- Prepayment / Part payment/ Preclosure Charges
- Variable charges, such as stamp duty, amortization fees, cheque interchange fees, and other fees as stipulated by the NBFC.
Documentation Required for Business Loan
The following is a list of the documents required for your NBFC business loan application:
KYC documents
- Passport-sized photograph
- Identity Proof (PAN Card/Driving License/Passport/Voter’s ID Card/Aadhaar Card)
- Address Proof (Driving License/Passport/Voter’s ID Card/Aadhar Card/Utility bills)
Entity Proof
- Business Registration Certificate
- GST Registration Certificate
- Partnership deed or Sole Proprietorship Declaration
- Trade License
- Shops and Establishment Certificate
Income Proof
- ITR along with Computation of Income (last 2 years)
- Audited financials with Tax Audit Report (last 2 years)
- Profit loss statements (last 2 years)
- Audited balance sheet
Bank Statements – Banking (last 6 months)
GST Returns – GSTR 3B – last 6 months)
Eligibility Criteria for Business Loan
Similar to banks, NBFCs have their own set of eligibility criteria for providing business loans. While these criteria are generally similar with minor differences, specific or case-based requirements may exist for different NBFCs.
Let’s explore the fundamental eligibility criteria for NBFC business loans:
- Typically, all entities, including sole proprietorships, Limited Liability Partnerships (LLPs), partnerships, and large enterprises, are eligible for NBFC business loans.
- The age range of the loan applicant must be at least 21 and 65 years at the time of the last EMI payment.
- A minimum credit score of 750 is required to avail an NBFC Business Loan.
- A business must be stable for at least 2 years.
- The company must be profitable for at least 3 years.
Also Read: Business Loan eligibility criteria in India
Types of NBFC Business Loan
Various types of loans are available from NBFCs for funding various business requirements. These are:
- Business Term Loan: This is a short- to long-term loan used by businesses for working capital needs, asset purchases, and expansion. The duration and interest rate of the loan depends on the chosen loan product.
- SME Loans: These are loans tailored for small and medium-sized enterprises, considering factors like business turnover and employee productivity.
- MSME Loans: MSME (Micro, Small, and Medium Enterprises) loans are similar to SME loans and are available to organisations falling within these categories. They are often granted quickly to new entrepreneurs, small business owners, and female entrepreneurs.
- Machinery Loans: Machinery loans also known as equipment loans are specifically for purchasing equipment or machinery, with the depreciation of the machines considered in determining the loan terms.
- Overdraft Facility: Overdraft is a type of credit facility that allows borrowers to deposit funds exceeding the loan amount and withdraw as needed, with the lender setting an account with an overdraft limit.
- Working Capital Loans: Working Capital loans aim to alleviate the immediate financial burden on businesses by covering expenses like purchasing raw materials and hiring logistics service providers.
How to apply for a NBFC Business loan through OneNDF?
OneNDF is a loan marketplace for borrowers to choose from different lenders and get the deals as per their requirements quickly, conveniently, and 100% digitally. These lenders are both banks and NBFCs catering to the business cash flow requirements of MSMEs.
Access a diverse range of debt products, including Business loans, working capital facilities, machine loans, and vendor finance solutions.
1. Sign-Up Process:
- Click on the “Sign-up” button to begin your journey with OneNDF or Click here
- Enter your mobile number to receive a One-Time Password (OTP) for verification.
- Apply for a business loan at a lower interest rate.
2. Business Authentication: After signing up, provide your PAN number. This step is crucial for verifying your business identity.
3. Registration and Profile Completion: Complete the registration process to build your profile on the platform. A comprehensive profile increases the success rate from initial login to loan sanction.
4. Credit Score Check: We will conduct a soft-pull of your credit score. This process does not generate an inquiry, thus not affecting your credit score.
5. Financial Information: You can upload the Downloaded ITR for your business (detailed PDF) or you can authenticate the credentials for the ITR portal and we will fetch this information and give you a snapshot. This helps in assessing your business’s financial stability.
6. GST Returns: Authenticate the GST credentials. Loans are provided to MSME clients, including both self-employed professionals and non-professional business owners based on their GST returns. ((This information can serve as a quick snapshot to help you understand your business better. It allows you to identify your top suppliers and buyers and monitor your returns effortlessly with just a click, eliminating the need to rely on your accountant for this data.))
7. Banking: Provide banking details for the last 12 months. This helps in analysing your banking turnover and financial transactions.
Upon completing these steps, we will tailor business loan offers from lenders (NBFCs) that best fit your requirements. Additionally, a comprehensive profile of your business will be created. This profile not only helps you understand your current business health but also provides recommendations on improving key financial ratios to maintain a healthy bottom line.
FAQs
1. Can an NBFC provide unsecured business loans to the borrowers?
Yes, NBFCs can provide unsecured business loans to their loan applicants. These loans can be offered through overdraft facilities, cash credit, and bill discounting. However, the minimum loan amount for unsecured business loans from NBFCs is typically higher than that of nationalised banks.
2. What is the processing fee charged for a NBFC Business Loan?
An NBFC typically charges a processing fee ranging from 2% to 5% of the gross loan amount.
3. Which NBFC is best to avail loans from?
There isn’t a definitive answer to which NBFC offers the best business loan, as most NBFC loans have similar features and vary mainly in terms of interest rates, repayment terms, and other charges. Here is a list of NBFCs offering SME loans that you may consider:
- Bajaj Finserv
- Tata Capital
- Lendingkart
- Fullerton India
- Aditya Birla Finance Limited
4. Can NBFC Business Loans be used for other purposes such as education or medical Expenses?
Yes, NBFC business loans can be used for specific purposes such as education or medical expenses, wherever applicable.
5. What is the interest rate of an unsecured NBFC Business Loan?
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