In India, small business owners have option to choose from a slew of business loans provided by various banks and non-banking financial companies (NBFCs). But a number of studies still suggest entrepreneurs find it difficult to avail credit on time. Entrepreneurs are often in need of credit to fund working capital needs or maintain positive cash flow position. The entrepreneurs must remember that there are a number of factors that impact small business loan disbursement time. Also, the disbursement time differs from one business loan product to another. Hence, the entrepreneurs must evaluate a number of factors to measure and reduce loan disbursement time.
Tips to Measure and Reduce Small Business Loan Disbursement Time
In India, small business owners can avail credit from both banks and NBFCs. Unlike banks, NBFCs take advantage of emerging financial technologies (fintech) to accelerate small business loan disbursements. Many small business owners prefer NBFCs to conventional banks to avail credit by avoiding lengthy and complex loan disbursement process. The amount of time required to get small business loans will vary according to lending institution selected by the borrower.
Business Loan Product
Both banks and NBFCs allow entrepreneurs to choose from a wide variety of small business loan products. But they need additional time to process and disburse conventional business loan products like term loans. On the other hand, the new age lending institutions enable business owners to access credit on time by converting their current assets into liquid assets.
For instance, a business owner can avoid lengthy loan disbursement process by opting for invoice discounting. They can opt for technology-driven loan products like point of sale business loans to access credit on time and based on real-time information. Hence, entrepreneurs can easily reduce loan disbursement time by opting for new age loan products.
The business loan eligibility criteria for individual loan products differ. Normally, lending institutions set strict eligibility criteria for unsecured or collateral-free loan products. On the other hand, they enable borrowers to avail credit quickly by providing personal guarantee or using assets as collateral. An enterprise can avail credit on time by opting for secured business loan products. But they have to wait for almost three months to get an unsecured small business loan.
Many NBFCs and fintech companies nowadays allow borrowers to apply for business loans through their websites. The entrepreneurs can visit the official website of the fintech company to compare available business loan products, apply for the business loan, and submit the required documentation. The fintech companies also provide credit to small business owners based on real-time financial data like monthly debit and credit card sales and value of unpaid invoices.
However, there are still a number of lending institutions that require borrowers to submit a variety of documents – financial statements, bank statements, personal and business tax returns, financial projections, and business plan. Interested entrepreneurs can read more on common documents required for business loans.The lending institutions need additional time to scrutinize these documents and disburse small business loans. The borrowers can easily reduce loan disbursement time by opting for a lending institution that provides credit based on real-time financial data.
Alternatives to Business Loans
The emerging fintech companies enable lending institutions to offer an array of new age small business loan products. There are several NBFCs that take advantage of fintech to allow borrowers to apply for term loans online. They even disburse the small business loans within 72 hours and offer flexible repayment options. At the same time, many NBFCs in India nowadays leverage the latest financial technologies to enable entrepreneurs to fund working capital needs without availing conventional term loans.
For instance, an entrepreneur can opt for invoice discounting to fund working capital needs by converting his unpaid invoices or goods received notes into cash before their due date. Likewise, they can opt for POS-based loans to avail credit on time based on the monthly sales routed through EDC or POS systems. The new age loan products enable entrepreneurs to avail credit on time without lengthy and complex disbursement process. The smarter entrepreneurs nowadays opt for technology-driven alternatives to conventional business loan.
On the whole, there are a number of factors which impact loan disbursement time. But both banks and NBFCs nowadays leverage fintech to reduce small business loan disbursement time. Some fintech companies even provide credit to small business owners within 72 hours. Entrepreneurs can easily reduce small business loan disbursement time by choosing the right lending institution and business loan products. However, it is also important for borrowers to understand the eligibility criteria for the specific small business loan product clearly.