NBFC loans vs bank loans
Historically, banks are the primary source of loan, but in recent years, Non-Banking Financial Corporations (NBFCs) have emerged as alternatives. Both banks and NBFCs are regulated by RBI but banks are subject to more stringent rules than NBFCs. Due to bank’s stringent lending terms, most individuals and businesses fail to meet traditional bank’s loan eligibility criteria. Banks and NBFC have their own set of pros and cons, and what might be better for one person may not be the same for another. Whether NBFC loans are better than bank loans or vice versa depends on one’s financial needs. Here are some factors that one can consider when comparing NBFC loans to bank loans:
Qualifying rules
CIBIL Score: Banks have stringent credit score requirements and are inflexible while providing loan facilities to applicants with low credit score. It becomes challenging to secure a loan from a bank with low credit score. However, applicants with low credit score have a chance to get approval from NBFCs. NBFCs don’t solely rely on credit score, they have important factors set to determine a borrower’s creditworthiness.
Higher Risk Appetite: NBFCs have higher risk appetite and typically a digital journey that provides more detailed reports on frauds. Additionally, these firms don’t take retail consumers money directly and are hence less stringently regulated by RBI. This means they are more willing to take riskier loans and borrowers who may not meet strict credit standards of banks. This can consist of individuals or businesses with less-established credit histories.
New to Credit: NBFCs might be more open to lending to individuals who are new to the credit market and do not have a substantial credit history. Banks often prefer borrowers with a well-established credit history. They have a system for evaluating credit that assesses a borrower’s creditworthiness. The NBFCs evaluate the borrower’s creditworthiness based on factors such as borrower’s turnover, bank statements, ITR and cashflows, etc.
Quick disbursement
Pre-approved loan limit
Customized loan structure
Conclusion
About Red Fort Capital
Red Fort Capital is dedicated to empowering Indian MSMEs (Micro, Small, and Medium Enterprises) on their path to business growth through customized business loans. We understand that securing a business loan in India can pose significant challenges, particularly when factors like a less-than-ideal credit score, a relatively short business history, unclear financial records, or variable cash flow come into play.
As a respected Non-Banking Financial Company (NBFC), we take pride in offering a diverse range of secured business loans, spanning from 1 to 10 Crores. What sets us apart is our remarkable ability to disburse funds fast, in just 7 days. Our financial solutions are meticulously designed to cater to a spectrum of needs, including working capital requirements, equipment and machinery purchases, invoice/bill discounting, and last-mile financing, among others.
