To choose between online lenders and banks for a business loan for shopkeepers is very difficult for the business owners. There is a lot to consider which often puts him in a dilemma. This write-up talks about the difference between an online lender and bank in depth in order to help you take an easy and sound decision.
Having access to additional funds is crucial for a shopkeeper to ensure his shop keeps running to its true potential and makes a good profit. A shop usually generates enough profits to finance its operations. However, it sometimes happens that the payments are delayed and some necessary expenses show up. Situations like this can affect the normal functioning and operations of the shop.
So, the shopkeeper looks towards availing a business loan for the shopkeeper. However, with a large number of lending institutions operating in the Indian market, the shopkeepers have plenty of options at their disposal. The two most famous among them are banks and online lenders.
What are Banks?
Banks are financial institutions that are regulated by the RBI – Reserve Bank of India and the Banking Companies Act. They offer a number of services to their customers, such as deposits, withdrawals, demand drafts, investments, and loans.
Who are Online Lenders?
The online lenders are NBFCs (Non-Banking Financial Corporations) with an online presence. They especially cater to micro, small, and medium enterprises (MSMEs) in India. They are regulated under the Companies Act, 1956. The online lenders do not offer regular banking facilities, such as deposits, withdrawals, and demand draft facilities. The online lenders offer both secured and unsecured business loans for shopkeepers.
Online Lenders VS Banks
A business owner faces a dilemma when deciding on the best business loan lenders in India. But in recent times, there is a shift in popularity for online lenders in India. They have skyrocketed in comparison to banks. The following are the reasons for the popularity shift from the banks to online lenders:
The online lenders offer personalized services to their customers which is usually missing in the case of banks. As a borrower, all you have to do is give a call or send a message to the online lender. And their representative will get back to you on call or an email to discuss their loan offerings and business loan requirements, such as terms and conditions. However, in the case of the banks, you will have to travel to the branch of the respective bank for all the required details.
Quick & Hassle-free Processing
Banks are very stringent in their terms and conditions that they follow while approving a business loan for shopkeepers. They are very unlikely to risk their money. And so, they take one thing at a time which makes the entire loan processing and approval process all the way very long. In contrast, the online lenders are lenient in this respect. They work towards offering the best solutions to the financial requirements of the shopkeepers. And that too, as soon as possible. They process the business loan for shopkeepers quickly and in a hassle-free manner.
The online lenders are very flexible with the terms and conditions and business loan interest rates. They are keen in offering business loans at the interest rates lower than the market rates. In comparison, the banks are rigid when it comes to interest rates they charge for a business loan for shopkeepers.
The online lenders offer unsecured business loans, i.e. business loans without collateral. This makes a small shopkeeper who does not have any collateral to offer can also have access to a loan for the business. In contrast, the banks, as said above, are not willing to take any risk with their money. So, they only offer collateral business loans. In case the shopkeeper defaults on the loan, they can sell the hypothecated asset to recover their losses.
Banks usually have limited business loan products for their customers and do not cater to any special requirements of the borrower. Whereas, the online lenders offer a range of business loan products for the customers, such as a working capital loan, capital loan, machinery loan, term loan, and flexi loan. They, in fact, also offer SME loans and MSME loans – specially designed loans products for SMEs and MSMEs. All the loan products offered by online lenders are designed keeping the small business owners and their needs in mind.
Terms & Conditions
The online lending companies are totally flexible with their terms and conditions for business loans. They are open to negotiations on repayment tenure, interest rates, etc. In addition, they do not even charge any prepayment charges on foreclosure of business loans. On the other hand, banks are strict regarding their terms and conditions.
Thus, it is pretty evident from the above points that availing a business loan for shopkeepers from an online lender in beneficial as compared to banks. However, you are recommended to conduct thorough research on the best online lender in India before zeroing in on any deal.