What is an NBFC Business Plan?

An NBFC Plan is a document containing the executive summary of a company. An NBFC Business Plan includes the major details of a company in terms of its vision, mission, business structure, promoter document, growth potential, market size for the proposed business, products and services on offer, sales and marketing strategies, human resource capabilities, SWOT analysis etc.

Every NBFC that wants to attract investments, obtain a loan for working capital needs to draft an NBFC Business Plan first which will act as a road map for achieving both short-term and long-term objectives of the NBFC.

Benefits of NBFC Business Plan

Following are the benefits of having an NBFC Business Plan:

1. Provides an executive summary of the whole NBFC business

An NBFC Business Plan provides a summary of the whole NBFC business and provides clarity with respect to the strategies, vision and mission of the whole business. It allows the NBFC business to check the achieved goals from the desired goals.

2. Helps in setting priorities

An ideal NBFC Business Plan helps the NBFC business set its priorities and sets the timeline in which the important tasks related to the business are to be achieved. An effective NBFC Business Plan makes the NBFC business become more productive and efficient in achieving its goals on time.

3. Tracking progress

An effective NBFC Business Plan clearly lays down the milestone to be achieved by the NBFC within certain duration of time. This allows the NBFC to track the progress made by the business and allows it to compare and analyse the achieved goals thereby increasing productivity and efficiency of the business.

4. Efficient management of cash flow

Like other banking entities, NBFC are also engaged in the business of extending loans, acquisition of stocks, providing financial backing to the people especially those belonging to the economically weaker sections of the society. This makes the NBFC business highly dependent on efficient management of cash inflow and outflow. A well drafted NBFC Business Plan ensures proper financial planning and efficient management of cash inflow and outflow.  

Objectives of an NBFC Business Plan

The key objectives of an NBFC Business Plan are as follows:

• To provide information to different stakeholders such as financial institutions, investors and funding institutions with a view to obtain loans from them;
• To encourage the NBFC to achieve its desired goals;
• To keep the employees updated with the plans and objectives of the company; and
• To provide a roadmap for the employees for firefighting and tackling critical situations.

This is the reason why every NBFC should always have a well-drafted NBFC Business Plan.

Important aspects of a Business Plan for an NBFC  

Following are some of the important aspects that should be considered while designing a Business Plan for an NBFC:

• It is the duty of the senior employees of the management to integrate the Business Plan into the Management Cycle of the NBFC;
• An NBFC Business Plan must reflect the primary position of the stakeholders in every planning process;
• The focus of the Business Plan should be on the process of business planning and management work;
• The NBFC Business Plan should be designed objectively on the basis of strong backing of statistics;
• The employees should be well versed with the particulars of the Business Plan before the same gets implemented;
• Discussions among the employees must take place on a periodical basis for effective business cycle;
• The procedure of implementing Strategic Plan should not be of a complicated nature;
• The NBFC Business Plan should be broad based and foresighted having enough flexibility to accommodate upcoming changes and future growth prospects.

What are the factors that can affect an NBFC Business Plan

 Following are the factors that affect an NBFC Business Plan:

1. Technological Advancements: The banking sector as a whole is undergoing a monumental shift due to technological advancements making banking operations faster, smoother and efficient. With advent of new technological changes such as Blockchain, cloud banking etc., a monumental shift is being witnessed in the banking sector and it can certainly impact the NBFC sector too. Therefore, an ideal NBFC Business Plan should be designed as such to accommodate the new technological solutions in their business.
2. Digitization of NBFC operations: As mentioned above, banking industry is witnessing a paradigm shift where digitization of banking operations is taking place at a fast pace leading to many of the regular banking operations carried out by people redundant. In some jurisdictions, physical banks are reducing in number and digital banks are growing at a fast pace. Therefore, an effective Business Plan should be such that it does take into account digitization of banking operations in coming times.

3. Change in the Consumer Preferences and Habits: the technological developments coupled with time consuming traditional banking operations have led to the change in the habits and preferences of the consumers. The consumers nowadays want seamless, faster and real-time banking operations to take place. As a result most of the consumers are shifting towards digital banking, open banking, crypto banking etc. An ideal NBFC Business Plan should always be designed keeping in mind the changing and ever-evolving habits and preferences in mind.

Procedure of designing a Business Plan  

The following elements should always be incorporated in an NBFC Business Plan:

1. Services offered by the NBFC

Before drafting an NBFC Business Plan, the management of the NBFC must have clarity with respect to the services that will be offered by the NBFC to their customers. Additionally, while deciding the kinds of services, the management of the NBFC should be aware of the market requirements. Further, the business plan should also mention the market size and the target audience for the NBFC as well.  

2. Executive Summary

Executive Summary refers to the aims and objectives of the NBFC. The investors or the creditors will get an overview of the business facts of the NBFC. It must be remembered while drafting the executive summary, that it should be fact based, precise, clear, concise and easily understandable.

3. Drafting of a basic Business Plan

In this step, the person designing the business plan must do an in-depth and extensive research of various kinds of NBFC Business models present in the market. Once the business model has been decided, a proper draft resembling the business model is prepared.

4. Statement of Vision and Mission

An ideal NBFC Business Plan should clearly mention the vision and mission of the NBFC in a summarised form for the proper understanding of the creditors and investors.

5. Description of the company

The next step after mentioning the Mission and Vision of the NBFC is to clearly demarcate the sectors where the NBFC business will be focusing. The management of the NBFC needs to mention the geographical locations and jurisdictions where the NBFC will be carrying out its business. The benefit of this step is to assist the potential creditors and investors in making an informed decision regarding the services and the market which the NBFC will be focusing on.

6. Business vehicle/ structure of the NBFC

Though an NBFC is a company registered under the Companies Act, it is necessary to mention about the business vehicle/ legal structure under which the NBFC has been constituted and also the relevant legal formalities in brief.

7. Budgetary Estimate

Any business at its initial stages should have a budgetary estimate for meeting day-to-day requirements. This budgetary estimate is also required for long term financial planning of the NBFC. It is advised that an NBFC should allocate a portion of its budget aside for the formalities and registration with the Reserve Bank of India.

8. Background of the Promoters

The Business Plan should also mention a summary of the academic, professional and financial background of all the promoters including the Directors, Shareholders and Promoters of the NBFC. This is taken into account by the RBI while assigning license to the said promoters.

9. Sales and Marketing

The NBFC Business Plan should also mention the sales and marketing techniques in brief which will be employed by it to reach to potential customers and investors. The Plan should also contain the strategies of marketing that will be employed by it.

10. Financial Structure of the NBFC

Along with the Budgetary Estimate of the NBFC, the Business Plan should also mention about the financial structure of the NBFC which deals with the spending requirements and expenses that NBFC may incur during its operations.  

11. Organizational Structure

Organizational structure is one of the key aspects of the Business Plan and mentions the information relating to roles and responsibilities of the shareholders, roles and responsibilities of the Directors and proper governance mechanism.

12. Financial Technology/ Digitization Collaborations

This part of the Business Plan is drafted if the NBFC wishes to offer digitized services or products related to financial technology in the present or in the future. This step is taken with a view to attract more customers and investors. 

Validity of an NBFC Business Plan

A well-designed NBFC Business Plan made in compliance with the existing regulatory and economic conditions is valid for a specific period only. This means that it does not have an indefinite validity.  

Tap Global can give you overall advisory and assistance in designing a well articulated, regulatory compliant NBFC Business Plan along with the overall, end-to-end NBFC registration and compliance services as we are a team of highly skilled & dedicated professionals. We specialize in providing legal consultancy services.