Question

What advantages do finance companies have over banks in offering services to small-business customers?

Answer 1

Following are the advantage to small business customers on financing from finance companies than from Banks:

1. The loan processing at financing companies is done much more faster than at banks i.e., quick loan processing, as there are multiple and stringent checks done at banks as compared to financing companies.

2. The banks put a lot emphasis on credit appraisal and credit score of the borrower and denies loans to proposals with low credit scores. Whereas the financing companies also finances the borrowers with low credit scores subject to overall comfort of repayment.

3. Financing companies generally do not have penalty clauses.

4. The repayment of loans is easier at financing companies as compared to banks.

5. For loans such as gold loan the financing usually allow regular interest throughout the loan tenure and repayment of principle in the end. However, banks require repayment of both principle as well as interest throughout the loan tenure.