How Are NBFCs Breaking the Financial Barriers for MSMEs?

May 23, 2024
Updated on

The role of Non-Banking Financial Companies (NBFCs) in facilitating access to finance and breaking financial barriers for Micro, Small and Medium Enterprises (MSMEs) is undeniable. MSMEs form an integral part of the Indian economy, contributing significantly to its overall output and employment. Despite being a major contributor to the Indian economy, MSMEs often face difficulty in accessing capital due to their lack of collateral, low credit scores, and limited financial literacy. Traditional banks often impose stringent lending criteria, which makes it difficult for MSMEs to apply for business loans. This has hindered the growth of MSMEs, which are often unable to cope with financial constraints. Here are some of the benefits of acquiring funding from an NBFC.

Why Business Loans from NBFCs are a Better Choice for MSMEs?

Collateral-free Business Loans

NBFCs are able to fill this gap by providing innovative financial solutions tailored specifically to the needs of MSMEs. Unlike banks, NBFCs do not require collateral for loans and are able to provide credit based on the potential of the business. NBFCs are becoming increasingly popular as more people are looking for alternative sources of financing. They are seen as a convenient and cost-effective way to access funds without having to provide collateral.

Easy Access to Finance

NBFCs provide an easier way for people to access finance and credit compared to traditional banks. They are highly regulated and are supervised by the Reserve Bank of India (RBI), providing a safeguard for customers. NBFCs are an easier and more convenient way to access finance. They have enabled people to access the funds they need to expand a business, purchase machinery or cover unexpected expenses. NBFCs are an important part of the financial system, providing a much-needed alternative to traditional banking and offering faster loan processing times.

Immediate Access to Finance

Finance available NBFCs have also made it easier for MSMEs to avail of long-term financing. The availability of long-term finance has enabled MSMEs to undertake capital-intensive projects and expand their businesses. In addition, NBFCs have made finance available to MSMEs at short notice, helping them to meet their immediate cash flow requirements.

Helps Remain Competitive in the Market

NBFCs are becoming increasingly important to MSMEs in their efforts to remain competitive in the market. They provide MSMEs with access to capital that allows MSMEs to access the capital they need to invest in various business-related expenses. NBFCs also offer valuable financial advice that can help MSMEs manage their finances more effectively and make the most of their opportunities.

Use of Digital Lending Platforms

The rise of NBFCs has also brought with it the advent of digital lending platforms. These NBFCs, backed by technology-enabled systems and algorithms, provide easy access to finance for MSMEs. By using data and analytics, these platforms are able to assess the creditworthiness of MSMEs and provide them with loans in a matter of minutes.

How Can NBFCs be the Credit Bridge for MSMEs in India?

In recent years, the MSME sector has seen a lot of growth and has become crucial to the country’s economic growth. The sector has seen a lot of reforms and has been provided with a lot of incentives to help it grow. Despite this, there are still some challenges that the sector faces, such as financial barriers. This is where NBFCs can help bridge the gap and provide credit to the MSMEs in India. NBFCs fill the gap left by traditional banking sources and provide quick, easy and convenient access to credit for MSMEs. An important part of the financial sector, MSMEs are regulated by the Reserve Bank of India. They provide a variety of financial services, such as loans and investments, to businesses, individuals and other institutions. These investment arms provide MSMEs with much-needed funds to expand their operations and launch new products.

NBFCs also provide collateral-free business loans to MSMEs, which is a great relief for small businesses. They provide MSMEs with financial advice and expertise, which can be invaluable to the success of their businesses. These services can help MSMEs to understand better how to access credit and make the best use of it. This can be especially beneficial for MSMEs that are just starting out and are unfamiliar with the financial sector. All in all, NBFCs can be a great bridge for MSMEs in India that are looking for access to capital and financial advice. They are able to provide MSMEs with a variety of services and products that can help them to grow and become more successful.

Business Loans from Kinara Capital

High collateral requirements and complex application procedures are among the main obstacles that MSMEs face while seeking capital. Due to the lack of details about the borrower’s financial history, Kinara Capital relies on non-traditional parameters to assess the borrower’s solvency. As a result, Kinara provides loans to businesses that are new to formal credit and have a flexible loan process.

Furthermore, MSMEs often face difficulty obtaining funds through traditional channels due to a lack of collateral and other stringent criteria. Banks are reluctant to offer them loans as the MSMEs can’t adhere to their regulatory norms. Kinara understands the challenges faced by MSMEs and has been incremental in promoting and supporting them.

Kinara Capital is the leading provider of small business loans in the range of Rs. 1-30 lakhs to the manufacturing, trading and services sectors in India, without taking any land or property collateral. Kinara has more than 50,000 happy customers and has impacted more than a million lives with economic growth. Kinara has the best loan products for MSMEs business needs.

How Kinara is Breaking the Financial Barriers for MSMEs

Primarily, challenges faced by MSMEs include failing to keep adequate cash flow to afford collateral assets for loans. In general, many MSMEs are unable to access financial product suites and facilities due to a lack of collateral securities, ambiguous credit histories, and insufficient accounts and records.

  • Kinara has a quick and transparent procedure to help budding MSME entrepreneurs fulfil their dreams. MSMEs can initiate their application process with a quick 1-minute eligibility check on Kinara’s website and eligible MSME owners can acquire the loan amount within 24-hours. In addition, Kinara’s loan officers will get in touch with the MSME entrepreneurs to assist them in their preferred vernacular language.
  • NBFCs like Kinara Capital, unlike banks, take a more flexible approach to obtaining a business loan. Customers can obtain financing quickly and conveniently.
  • Unlike bank loans, Kinara’s loan parameters are linked to external benchmarks. Kinara has more transparent and relaxed plans for consumers with poor credit scores. This is a good approach to reducing the challenges faced by MSMEs.
  • NBFCs such as Kinara Capital have risen to prominence as a fantastic alternative to the conventional banking system. This happened due to their versatile financial procedure, which has provided business owners with accurate business loan eligibility. In addition, have corrected and revolutionised the age-old business financing practices to benefit their clients more by lowering business loan interest rates.


NBFCs have been game-changers for MSMEs and they have been active in providing the much-needed financial assistance to small and large businesses across the country. NBFCs have proven themselves to be great catalysts when it comes to reducing the financial barriers faced by MSMEs. With increased competition in the lending sector and the high cost of borrowing, every business player must be as flexible as possible in their practices. When it comes to credit services, modern borrowers are tech-savvy and have high-tech demands. Therefore, a more customer-friendly approach with technical integrations and improvements can offer a lending company an advantage over the competition.

Kinara Capital is actively expanding its customer base and increasing its market share by providing various credit disbursement options to borrowers. Kinara is an important source of financing that offers Unsecured Business Loans to fit the funding needs of the small business owner. Applying for a Business Loan from Kinara Capital can be a great way for MSME entrepreneurs to access needed financing to help their businesses thrive. Kinara Capital’s digital process enables small business owners to check their eligibility in just 1-minute through the myKinara App. MSME entrepreneurs can avail of a collateral-free business loans from ₹1 lakh – ₹30 lakhs within 24-hours. Also, we have a dedicated customer support team available between Monday – Friday (9.30 AM – 6.00 PM) at our toll free number 1800-103-2683 for any questions or assistance. This ensures that entrepreneurs can get the help they need throughout the loan process.


What are the benefits of NBFCs for MSMEs?

NBFCs offer unsecured loans to MSMEs which means that they don’t require collateral. This is a huge benefit to MSMEs as it eliminates the risk of losing assets if they fail to pay back the loan. NBFCs also provide working capital to MSMEs, which helps them to operate and expand their businesses. This helps them to grow and become more competitive in their industries. 

How are NBFCs breaking financial barriers for MSMEs?

NBFCs are providing MSMEs with access to more capital and financing options than ever before. They are providing innovative solutions such as short-term loans, microfinance, and alternative financing options that are tailored to the needs of the MSMEs. This is enabling them to access finance more easily and at more competitive rates.

What types of financing are available to MSMEs through NBFCs?

NBFCs offer a range of financing options to MSMEs, including short-term loans, microfinance, and alternative financing. These options are tailored to the needs of the MSMEs and provide them with access to the capital they need to grow and develop their businesses.

How can NBFCs help MSMEs increase their profitability?

NBFCs can provide MSMEs with access to capital, expertise, and market opportunities that can help them increase their profitability. They can also provide support in terms of marketing, technology, and operational assistance.

Can NBFCs help MSMEs access global markets?

Yes, NBFCs can help MSMEs access global markets by providing them with capital and financing options that are tailored to their needs. This can help them to expand their business and access new markets.

What are the risks associated with using NBFCs for financing?

As with any type of financing, there are risks associated with using NBFCs for financing. These include the risk of default, as well as the risk of not being able to access the capital needed to expand or develop the business.

How can MSMEs access capital from NBFCs?

MSMEs can access capital from NBFCs by applying for a loan or other financing option. This can be done online, in person, or by using a broker. It is important to compare different financing options and to check the terms and conditions of the loan before signing any documents.

What type of criteria do NBFCs use to evaluate loan applications from MSMEs?

NBFCs typically evaluate loan applications from MSMEs based on the creditworthiness of the applicant and the business, as well as other factors such as the amount of capital needed, the purpose of the loan, and the repayment terms.

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