Small Business Loan in Visakhapatnam: Should You Seek Finance from a Bank or NBFC



The right source and timing of finance can go a long way in helping entrepreneurs and businessmen attain their goals, as funds are indispensable for the smooth functioning of business activities. If you are in need of a small business loan in Visakhapatnam, you can apply either to a bank or a Non-Banking Financial Company (NBFC). In fact, Visakhapatnam is soon to witness a major boost for micro, small and medium enterprises, i.e. the MSME. The good news is, the District Industrial Promotion Committee is already in the process of setting up at least one MSME Park in every constituency of Visakhapatnam District. Land acquisition is already in the process, and this is expected to give a major boost to the aspiring business enthusiasts in the city. The MSME Park will sprawl over an area of 0.5-1 acre and it will also host the necessary infrastructure. MSME focused campaigns will also soon be launched which will identify those interested in starting a business in the sector.

While banks in India are incorporated under the Banking Regulation Act, 1949, the governance of NBFCs is under the purview of Companies Act, 1956. NBFCs are primarily concerned with providing loans and advances, offering credit facility, and managing the portfolio of stocks, though they do not perform the other financial activities conducted by banks, such as, accepting demand draft and issuing cheques. NBFCs can be divided into three categories- a. asset companies, b. loan companies, c. investment companies. Traditionally, banks held much more importance as compared to NBFCs; however, in recent times, there seems to be an inclination towards the latter amongst the masses. Many businesses nowadays prefer to seek loan for business from such institutions, for they offer certain advantages which a bank does not.

1.    Quicker processing: it hardly needs to be mentioned that banks are way too stringent about the applicants meeting the required eligibility criteria. On the other hand, NBFCs have a relaxed and lenient way of loan approvals, and require minimal documentation. The processing and disbursal of the loan is also much faster, which proves to be highly advantageous for businesses in urgent need of funds.

2.    Competitive interest rates: This is one of the major aspects of a small business loan that is always taken into account by borrowers, as a lower rate of interest indicates a lower cost of serving the loan. This in turn leads to lower EMIs. NBFCs generally change a competitive interest rate based on the turnover of a particular business. The credibility of the applicant also plays a key role in determining the interest rate.

3.    Availability of loans for those with poor credit history: Banks do not generally sanction loans if you have a bad credit report, as banks consider those with low credit as high-risk individuals who may default on their EMI payments. However, NBFCs offer business loans in Visakhapatnam to even individuals with a lower credit score. In fact, they came into existence to complement banks when it comes to offering business loans, in public and private sector alike. It is interesting to note that NBFCs are performing better than banks, with their balance sheet expanding by 15.5%, as revealed by a latest report from the Reserve Bank of India (RBI).

However, the final decision to apply for quick business loans should be made, keeping in mind a number of factors, such as the loan type, the interest rates, charges, credit score, and the loan disbursal timelines.
As finance is imperative for the growth of small businesses, in Visakhapatnam as well as elsewhere, banks alone are not enough to meet the requirements. This is where NBFCs such as Bajaj Finserv comes into play, with its lucrative business lending rates, minimal documentation, easy eligibility criteria, flexi loan facility, online account access, and a number of other benefits.

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About Jitender Sharma

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