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Thanks to digitalisation, business loans requirements now can be fulfilled faster with online loan processing. Even there are government initiatives such as PSB loans in 59 minutes that assure loan approval in an hour’s time. However, many business owners still prefer offline business loans as it offers perosnalised service from the lender. Online business loan or offline business loan – what should you choose? In order to seek answers to this question, let’s first understand the definition of online and offline business loans, their features and the key differences.

Definition of online business loan and offline business loan

Online business loan:

An offline business loan is one where the entire loan borrowing process takes place online – that is without physically visiting a bank. A borrower can seek a business loan by visiting the trusted/official website of the lender. In this case, the entire loan application process is online. Borrower fills in the application form online and uploads documents. The lender verifies the documents and approves the loan. Once the borrower accepts the offer, the lender disburses the loan.

Online business loans are generally short term loans i.e., tenure of up to 5 years and the limit of the loan amount is lesser as compared to offline business loan. Moreover, there is no involvement of collateral for an online business loan. Some of the examples of business loans that can be sought online include working capital loan, pre-approved loan, GST business loan, Aadhaar Card business loan and so on.

At Tata nexarc we understand the value of getting access to funds when needed. We have partnered with leading lenders and offer business loans up to ₹50 lakhs without collateral. You can submit your documents online and get a loan offer within 5 minutes. Try now.

Offline business loan:

This is the traditional way of seeking a business loan. Also, a more perosnalised way where the borrower and lender meet face-to-face to discuss the loan requirements and procedure.

The borrower visits the bank or NBFC with the requirement, submits documents and gets a loan approval letter. Once it is approved, the business loan agreement is signed, and the loan is disbursed.

Generally, offline loans are of a higher amount, collateral is required for the business loan, and documentation is extensive. Also, its tenure can be of up to 10 years or more meaning they are long term loans. Some examples of offline business loans include loan for buying new machinery or factory, etc.

Note: Although the borrower can visit the lender for any kind of loan requirement, an online business loan is generally, a quicker and more convenient way for seeking a smaller amount of loans with no collaterals.

Features comparison: Online business loan vs offline business loan

Here are some of the key differences between an online business loan and an offline business loan.

  • Convenience: In the case of an online business loan, it is more convenient to seek from the comfort of an office or home. There is no need to visit the bank. Additionally, documentation is lesser. On the other hand, seeking an offline business loan is comparatively more tedious.
  • Documentation: Usually documentation is lesser in the case of an online business loan. A borrower needs to upload basic KYC and financial documents are sufficient for loan approval especially if it is an unsecured or collateral free loan. Contrary, offline business loans often involve more documentation. The borrower needs to get photocopies of all the required documents, fill in the form physically and submit it. In the case of a secured loan, paperwork is even more exhaustive.
  • Time for processing: Online business loans are processed faster. All that the borrower has to do it is to upload scanned copies of documents, fill in the form and submit the proposal. The loan approval comes within a short while. Alternatively, the offline business loan process involves multiple visits to a bank or financial institution, getting photocopies of the documents, discussing with bank officials, arranging a guarantor if needed and so on.
  • Processing fee: Online business loans may or may not have a processing fee associated with it. For example, in the case of a pre-approved loan, no processing fee is charged. You need to read the terms and conditions beforehand to understand the factor of processing fees. In the case of an offline loan, a processing fee is usually charged.
  • Personalied service: The process of an online business loan is mostly automated and manual intervention from the bank is only done where it is required such as verification of documents, etc. As a result, it does not offer any personalised service. In the case of offline business loans, the banks offer a personalised service and handholding in tedious activities such as filling in the forms, etc.

Differences between online business loan and offline business loan

Online business loan Offline business loan
Method of application You can apply online via the bank/NBFC website. Entire process is completely online You need to visit a bank of NBFC for getting the application form and submit it offline.
Loan amount Lesser loan amount usually up to ₹1 crore The loan amount can be higher based on the lender and loan type
Tenure Shorter duration – repayment usually within 3-5 years. Longer duration – can be up to 10 years
Documentation Minimal documentation. Exhaustive documentation.
Processing fee There could be less or no processing fee. Higher documentation attracts higher processing fee.
Convenience Highly convenient. Less convenient with multiple visits to the bank.
Personalised service No personalised service. Banks offer perosnalised service and handholding wherever required.
Possibility of business loan scams There is a higher possibility of a business loan scam. Since you visit the bank personally, there is a lower possibility of a business scam.

What should you choose – online business loan or offline business loan?

It is important to the right loan scheme for your business instead of method of approval. Here are some of the factors that can help you to choose the right loan scheme.

Business Loan
  • Determine needs: First, you need to analyse your business needs and define the purpose of seeking a loan. If you are buying a factory property or commercial vehicle or your requirement for funds is considerably high, you need to visit the bank personally and apply for a business loan. On the other hand, if you are looking for funds for running everyday operations, you can apply for a working capital loan online.
  • Urgency: Urgency of requirement is yet another important factor to consider. If your requirement for a loan is lesser and urgent, you can opt for an online business loan while if it is a planned investment such as loan for machinery, you can visit the bank to apply.
  • Loan scheme: Apart from banks and other financial institutes, the central and state governments also have established various loan schemes to support the MSME sector. Some of the popular government schemes include Prime Minister Mudra Yojana, Stand-Up India scheme, etc. Browse through the scheme and what suits you the best. Check if you can apply for the same online or offline.

Conclusion: Tips for getting a business loan

  • Whether you choose online or offline method of seeking a business loan, you must read the business loan agreement carefully.
  • Be careful while applying online. Do not click on any random links as the chances of business loan scams are higher in the case of online business loans.
  • Instead of focusing only on the convenience of online loans, or personalised service of offline loans, focus on your business needs fulfilment. Explore both kinds of loans and choose the one that suits your needs the best.

Swati Deshpande

Swati is a passionate content writer with more than 10 years of experience crafting content for the business and manufacturing sectors, and helping MSMEs (Micro, Small and Medium Enterprises) navigate complexities in steel procurement, and business services. Her clear and informative writing empowers MSMEs to make informed decisions and thrive in the competitive landscape.