Shopkeepers are the small business owners who find themselves in need of financial support from time to time. They are always in a fix with the options available in the finance market. Bank loans, informal loans, and NBFCs are the options that are highly suitable for business loans for shopkeepers and traders. But there are still a lot of factors due to which these borrowers face a hard time.
Why Not Bank Loans?
Bank loans for shopkeepers take a lot of time which they usually do not have in abundance. These bank loans require the borrowers to go through a very detailed and lengthy procedure of business loan application and always ask for some collateral. This is a major problem for shopkeepers and traders as they usually do not have a lot of assets to offer as collateral. So, this rules out the option of bank loans for a lot of small businessmen.
Why Not Informal Sector?
Loans borrowed from the informal sector are basically debts taken from local money lenders. These money lenders sometimes do not ask for collateral, but it is typical of them to charge high business loan interest rates. It is a very common practice for them to charge high interest rates in comparison to the market interest rates. But unlike bank loans, they do not have a complex procedure of application and do not take a lot of time to process.
Shopkeepers and traders often opt for business loans from the informal sector. But a high interest rate is a problem for many of these small business owners. They do not have the liberty of paying such a high business loan interest rate with the little turnover they make from their small businesses.
Why NBFC Business Loans?
Another option for these borrowers is an NBFC business loan which suits their flexibility of obtaining business loans. NBFCs offer business loans that are focused on lending financial help mainly to micro, small, and medium business owners.
NBFCs check all the inadequacies of the bank and informal sector which is faced by the borrower. These business loans are sanctioned within the time period of a few working days. This is a major benefit for the shop owners as they cannot afford to waste their business hours on lengthy formal procedures of business loans. NBFCs also come as a savior for MSMEs when immediate credit is required. NBFCs require only a few business loan documents which are listed as PAN card, bank statement of last 12 months, Income tax return of last 2-3 years, address proof of business, and an address proof of the residence. This is very basic and minimal procedure compared to the heavy list of documentation required by the banks.
Benefits of NBFC Business Loan
• A major advantage in obtaining NBFC business loans is that the borrower does not have to pledge an asset or property as collateral, which later can be confiscated in case of failure of repayment. NBFC loans do not require any collateral from business owners that have an annual turnover of 10 lakhs or more. This gifts the borrower a financial independence to support their business. If they have an asset, and borrow a business loan, then in the unfortunate events of bankruptcy, they can fall back to rely on the asset.
• Another major advantage of NBFC business loans is no prepayment charges. This means that in case of early repayment of the business loan, there will be no prepayment charges, which is a problem while borrowing funds from banks. NBFC business loans are focused majorly on the development of micro, small, and medium scale businesses. They are keen to offer all the financial help that the business owners need.
Micro, small, and medium scale business owners always think of ways to develop and promote their business. Finance is a major factor in the development of any business. These business owners cannot be very flexible with their options, so they will always choose the source of finance which fits the best in their requirements. NBFCs provide hassle-free, easy and instant credit to micro, small, and medium enterprises which are very important to the business owners. Other options like business loans from banks and business loans from the informal sector have their inherent drawbacks due to which the borrowers often opt for NBFCs.