Loan Company Registration

Procedure for Registering a Finance Company in India

Research about the Industry–First and foremost, it is important to have a good understanding and knowledge about the financial sector. Next, he is required to decide the type of finance company he or she wants to operate, as the Indian finance companies operate differently than the traditional banks and each of them have specific requirements.

Apply for the Company Registration – After the concerned applicant has chosen his business model, he needs to apply for the finance company registration. For which he needs tovisit a local branch of the Reserve Bank of India (RBI)or visit its official website. Now, download the application form for the NBFC registration and enter the required information and details. Next, he or she is required to upload the said form so that he or she can receive a reference number.

Visit a regional office of the RBI with the provided reference number and the registration form. If in case the concerned personmeets the requirements mentioned in Section 45-IA of the RBI (Reserve Bank of India Act) of 1934, then the bank will issue him a Certificate of Registration within a period of fivetosix months.

Further, in order to determine what type of NBFC license suits the applicant needs. This will depend on the nature and type of business. One can easily start an asset finance company, a micro-finance institution, a loan company,and more.

No matter what the concerned applicant chooses, in India, registering a finance company isnot going to be an easy task. So, he or she needs to be prepared to file outextensive paperwork and wait for a final decision. In the meantime, he can create a business plan.

Assess the available Business Requirements – Depending on the size and nature of the concerned business, analyse the costs involved in setting up. Now, consider the utilities, salaries and wages, office space andmarketing activities. In addition, the concerned individual will also require to invest in the advertising, web design anddigital marketing.

Further, also determine the number of employees needed in the company. Also, decide whether the concerned individual is going to run the business all his alone or with a financial partner. For example, if a person is having a lending business, he or she could hire a mortgage broker, who will act as an intermediary between the concerned company and the borrowers in exchange for a fixed commission.

Develop a Business Plan – Once the applicanthas obtained the license, now write down about theshort- and long-term goals,strategies,missionand the product offerings. Moreover, also consider the market conditions and the potential competitors.

A company which is not having any financial assets which is more than 50 per cent of its total assets, and moreover, does not derive at least 50 per cent of its gross income from such assets is not a Non-Banking Financial Corporation. Further, its principal business will be non-financial activity such as theindustrial activity, agricultural operations, purchase or sale of the goods or purchase or construction of the immovable property, and will be considered as a non-banking non-financial company (NBFC). Further, acceptance of deposits by an NBFC(Non-Banking Non-Financial Company)is governed and regulated by the rules and regulations issued by the MCA (Ministry of Corporate Affairs).

Loan Company is one of the types of NBFC primarily engaged, in the business, of providing finance to the public whether by making advances or loans or otherwise from any activity other than its own. However, it does not include an Asset Finance company, equipment leasing company or a hire-purchase company.

No, a private Limited company is not allowed to accept a loan from the outsiders.However, it is eligible to accept a loan from his directors. If in case a private company accepts any amount from any of the outsiders, then it shall be considered as a deposit as per the provisions of the Companies Act, 2013 and then the company is required to comply with all the deposits rules.

No, anNBFC (Non-Banking Financial Company) cannot give interest free loans. Further, for understanding this concept, one should read section 185 and 186 of the Companies Act, 2013. However, under certain prescribed circumstances, few companies are exempted from the compliance of such sections.

NBFCs (Non-banking financial companies) are those financial institutions that offer several banking services to the general public but do not have a banking license. Normally, these institutions are not allowed to take any traditional demand deposits or readily available funds, such as those in savings accounts from the public. Further, NBFCs can provide banking services such as loans and credit facilities, retirement planning, money markets, currency exchange, underwriting, and merger activities.

Both the Banks and NBFCs compete against each other for some similar kinds of business on the asset side. Further, NBFCs provide products or services which include corporate loans, leasing and hire-purchase, investment in the non-convertible debentures, margin funding, small ticket loans, IPO funding, venture capital, etc. However,the NBFCs do not provide any kind of operating account facilities such as savings and current deposits, overdrafts, cash credits etc.

Yes, NBFCs are eligible to offer unsecured working capital loans in the form of facilities such as the cash credit, overdraft, and bill discounting etc. Butit is significant to note that theNBFCs are more focused towards the consumer loans and term loans.

Overall, obtaining online personal loans are very safe and easy to use, provided the concerned applicant take a few precautions and also check to see that the concerned lender has secured its website. Further, in order to ensure safety while borrowing online, the concerned applicant is required to make sure that he or she is dealing with a reputable lender. Furthermore, it is also significant for the concerned applicant to keep an eye out for the red flags. Lastly, the major risk attached whenever borrowing money online is of losing money, as the fake lenders can easily set up a shop, promise the world to world to fool, and charge their fees for approving applicant’s loan.