In India’s fast-changing business environment, startups are becoming the backbone of economic growth. They are introducing innovative products, services, and ideas that help create jobs and solve real-life problems. But for startups to grow and scale, they need funding. While traditional banks are the first name that comes to mind for financing, many startups today prefer funding from NBFCs (Non-Banking Financial Companies).
In this blog, we will explain why startups are choosing NBFCs over traditional banks, how NBFCs work, and how Corpbiz can help you with NBFC registration, P2P lending license, RBI Account Aggregator license, and PPI license.
What is an NBFC?
An NBFC is a financial company that provides services similar to banks, such as lending money or investing, but it doesn’t hold a banking license. NBFCs are regulated by the Reserve Bank of India (RBI) and play a vital role in delivering credit to various sectors like MSMEs, infrastructure, real estate, and startups.
Why Are Startups Preferring NBFCs for Funding?
1. Faster Loan Processing
Banks often have rigid procedures and long verification processes that may delay loan approvals. NBFCs are more flexible and use modern tools like digital onboarding and alternate credit scoring, which speeds up the loan disbursement process. For startups, time is money, and NBFCs understand that.
2. Less Documentation
Startups usually don’t have years of financial statements or high credit scores that banks demand. NBFCs are more open to evaluating other parameters like business potential, innovation, customer base, and market size. They require minimal paperwork compared to banks.
3. Customized Loan Products
NBFCs offer customized funding solutions based on a startup’s needs. These could include working capital loans, equipment financing, invoice discounting, or revenue-based financing. The flexibility of NBFC products makes them suitable for new businesses.
4. Access to Innovative Lending Models
With the rise of fintech, NBFCs are also using innovative models like P2P lending and Account Aggregator frameworks. These models allow better data analysis, making funding decisions more accurate and startup-friendly.
5. Higher Risk Appetite
Startups are risky ventures. Traditional banks are conservative and less willing to lend to startups with little history. On the other hand, NBFCs, especially fintech NBFCs, are more open to taking calculated risks by using technology and alternate data.
The Role of NBFC Licensing in Startup Funding
To become an NBFC or lend in innovative ways, licenses are required from the RBI. Here are some important licenses:
1. NBFC Registration
Any company planning to offer lending or investment services must obtain NBFC registration from the RBI. The NBFC registration cost depends on the type of NBFC (loan company, investment company, infrastructure finance company, etc.), but the minimum net owned fund required is ₹2 crore.
2. RBI Account Aggregator License
This Account Aggregator license allows an NBFC to collect and share financial data of individuals or businesses with consent. It helps lenders (including NBFCs) to understand the financial health of a startup more clearly.
3. P2P Lending License Apply Online
P2P (Peer-to-Peer) lending allows individuals to lend money directly to borrowers using an online platform. NBFCs that want to run P2P platforms must register P2P Lending License with the RBI.
PPI (Prepaid Payment Instruments) are used for issuing wallets or prepaid cards. This is especially useful for fintech startups and NBFCs providing digital financial services.
How NBFCs Are Shaping Startup Growth in India
NBFCs are not just lenders—they are growth enablers for startups. Here's how:
Promoting Financial Inclusion – Startups from Tier-2 and Tier-3 cities, where banks hesitate to operate, can get easy loans through NBFCs.
Encouraging Digital Transformation – Fintech NBFCs offer end-to-end digital services.
Creating Employment – As startups grow with NBFC support, they generate jobs and contribute to the economy.
Supporting Government Missions – NBFCs are helping startups working under schemes like Startup India, Make in India, and Digital India.
Why Choose Corpbiz for NBFC Licensing?
At Corpbiz, we specialize in helping entrepreneurs, startups, and investors navigate the complex regulatory landscape of NBFCs. From NBFC registration to applying for P2P Lending, Account Aggregator, or PPI license, we offer complete hand-holding support.
✅ Expert Guidance
✅ End-to-End Documentation
✅ RBI Compliance Support
✅ Timely Updates and Filing
FAQs: NBFC and Startup Funding
Q1. Is NBFC funding safe for startups?
Yes, NBFCs are regulated by the RBI and offer safe and flexible financing options suitable for early-stage businesses.
Q2. What is the cost of NBFC registration?
The NBFC registration cost includes a minimum net owned fund of ₹2 crore along with RBI filing, professional fees, and compliance setup. Corpbiz provides complete packages for smooth registration.
Q3. Can a startup register as an NBFC?
Yes, if the startup plans to offer financial services, it can register as an NBFC. However, it must meet RBI's eligibility norms.
Q4. What is a P2P lending license?
A P2P lending license is issued by RBI to companies that want to run online platforms connecting borrowers and lenders.
Q5. What is the benefit of an Account Aggregator license?
It helps NBFCs access financial data of customers after their consent. This makes lending decisions faster and more accurate.
Final Thoughts
NBFCs are becoming the go-to funding source for startups in India. Their flexible approach, technology-driven services, and customized products make them more appealing than traditional banks. As more startups look for smart funding solutions, the demand for licensed and compliant NBFCs will only grow.
If you're a startup looking to start an NBFC, get funding, or build a fintech product, Corpbiz is here to help you at every step.
