Business loans are a crucial financial tool for businesses of all sizes, enabling them to expand, invest in new equipment, or manage cash flow. This article provides a comprehensive comparison of the best banks and Non-Banking Financial Companies (NBFCs) offering business loans in India. By understanding the various loan features, interest rates, eligibility criteria, and additional fees, businesses can make informed decisions to meet their financial needs. In this guide, we’ll explore some of the best banks and NBFCs offering business loans in India, the types of loans available, and the key factors to consider when selecting a lender.
By the end of this article, you’ll have a comprehensive understanding of how to make an informed choice for your business financing needs.
Types of Business Loans Available in India
Before diving into the comparison of lenders, it’s important to understand the different types of business loans available to Indian businesses. This helps in selecting the appropriate loan that aligns with your business goals.
1. Secured vs. Unsecured Business Loans
Secured Business Loans: These loans require collateral, such as property, equipment, or other business assets, as security against the loan. Typically, they charge lower interest rates and offer larger loan amounts.
Unsecured Business Loans: These loans do not require any collateral, making them ideal for small and medium-sized businesses that may not have assets to pledge. As it increases, the risk for lender interest rates might be higher.
2. Short-Term vs. Long-Term Loans
Short-Term Loans: Typically used for immediate cash flow needs, these loans have shorter tenures (usually up to one year) and are perfect for working capital requirements.
Long-Term Loans: With tenures extending beyond one year, these loans are suitable for capital-intensive projects such as equipment purchases, infrastructure development, or expansion plans.
3. Specific Business Loans
Working capital loans: Designed to meet day-to-day business expenses, these loans provide the liquidity required to maintain cash flow.
Equipment Financing: These loans help businesses purchase or lease machinery and equipment essential for their operations.
Term Loans: A lump sum amount that must be repaid over a fixed term, ideal for large investments or business expansion.
Key Factors to Consider When Choosing a Lender
With numerous banks and NBFCs offering business loans in India, it’s crucial to compare lenders on several key parameters to ensure the best fit for your business.
1. Interest Rates
Interest rates are a major consideration when choosing a lender. Business loans typically come with two types of interest rates:
Fixed Rates: The interest rate remains constant throughout the loan tenure, ensuring predictable monthly payments.
Floating Rates: The interest rate fluctuates based on market conditions, which can lead to varying monthly payments.
Banks often offer lower interest rates for secured loans, while NBFCs may provide slightly higher rates but offer more flexibility in terms of eligibility and collateral.
2. Loan Amount and Tenure
The loan amount you can access and the repayment period varies significantly between lenders. While some banks offer high-value loans with long tenures, NBFCs might offer lower amounts but quicker disbursement.
Banks: Often preferred for large loan amounts with longer repayment tenures (up to 10 years).
NBFCs: Like in Ambit Finvest Known for faster loan processing and smaller loan amounts, ideal for SMEs and startups.
3. Eligibility Criteria
Lenders often assess the following when evaluating a loan application:
Business vintage (years in operation)
Annual turnover
Financial history
Banks tend to have stricter eligibility criteria, whereas NBFCs might be more lenient, especially for smaller businesses and startups.
4. Processing Time and Documentation
Banks generally require extensive documentation and take longer to process loans.
NBFCs: Known for quicker approvals, minimal documentation, and fast business loan disbursements, especially for unsecured loans.
5. Hidden fees
It’s important to look beyond the interest rate and evaluate the total cost of borrowing, which includes:
Processing fees: one-time charges levied during loan approval.
Prepayment penalties: charges for repaying the loan early.
Late payment penalties: fees for missed or delayed payments.
Top NBFCs Offering Business Loans in India
NBFCs are increasingly popular for their ability to provide quick, flexible financing options to businesses, particularly small and medium-sized enterprises (SMEs). Below, we explore some of the leading NBFCs, including Ambit Finvest, that offer business loans in India.
1. Ambit Finvest
Loan Features: Ambit Finvest is known for providing tailored financial solutions to SMEs across India. It specializes in offering secured and unsecured business loans, including working capital loans and term loans.
Interest Rates: Competitive rates depending on the loan amount and business profile, starting from 12% p.a.
Eligibility: Targeted primarily at SMEs, Ambit Finvest offers loans to businesses that have been operational for a minimum of 2 years, with a satisfactory credit history and financial records.
Features:
Quick loan processing and disbursement for eligible businesses.
Flexibility in loan structuring to meet specific business requirements.
Minimal documentation and a straightforward application process.
• Credit amounts between₹5 lakhs and₹50 lakhs.
Target Businesses: Ambit Finvest primarily focuses on SMEs looking for fast business loans to meet working capital needs, expand operations, or invest in new equipment.
2. Bajaj Finserv
Loan Features: Unsecured loans with minimal documentation; loan amounts up to ₹45 lakhs.
Interest Rates: Starting from 12% p.a.
Eligibility: small and medium businesses with a minimum turnover of ₹30 lakhs.
Features: Fast business loans with quick approval and disbursal in as little as 24 hours.
4. Aditya Birla Finance
Loan Features: Specializes in providing both secured and unsecured business loans.
Interest Rates: Starting from 13% p.a.
Eligibility: medium to large businesses looking for capital expansion.
Features: flexible loan tenures and minimal paperwork.
How to Apply for a Business Loan
Application Process
Step-by-Step Guide:
Research and compare loan options.
Check eligibility criteria.
Gather the required documentation.
Apply online or at a branch.
Await approval and disbursal.
Required Documentation
List of necessary documents:
Business registration proof.
Financial statements (last 3 years).
Bank statements (last 6 months).
KYC documents of the business owner(s).
Income tax returns (last 3 years).
Tips for a Successful Application
Best Practices:
Maintain a good credit score.
Ensure accurate and complete documentation.
Pick a loan option that best suits your requirements.
Be transparent about your business financials.
Challenges and Considerations
Common Challenges
Stringent eligibility criteria.
High interest rates for unsecured loans.
A lengthy approval process for large loan amounts.
Important Considerations
Factors to Consider:
Assess your repayment capacity.
Compare interest rates and additional fees.
Understand the terms and conditions of the loan.
Conclusion
The expansion and viability of businesses depend on business loans. through closely evaluating the available options. Small and medium-sized businesses depend on business loans to grow and survive. By carefully comparing the options provided by various banks and NBFCs, businesses can choose the best lender to meet their financial needs. NBFCs like Ambit Finvest have emerged as reliable partners for small and medium-sized enterprises, offering flexible, quick, and accessible business loans with competitive rates.
By assessing your business’s financial needs and comparing the available offerings, you can secure a loan that best fits your business strategy, ensuring smooth cash flow and fostering growth.
