How smaller NBFCs can raise secured debt from larger NBFCs
NBFC-to-NBFC lending lets a smaller NBFC borrow against security from larger NBFCs. This guide explains how a secured raise works, how one proposal can reach several lenders at once, and what parity means for the borrower.
What NBFC-to-NBFC lending is
For most NBFCs, borrowed money is what funds the loan book. Raising debt is therefore a recurring part of running the business rather than a one-off event, and the treasury team is never far from its next raise.
In NBFC-to-NBFC lending, the lender is itself an NBFC. A larger NBFC lends to a smaller one, and the smaller NBFC uses that funding to keep lending to its own customers. Both sides run lending businesses, so the lender reads the borrower's book the way it reads its own: by segment, by quality and by the security that stands behind it.
Why the debt is secured
In secured lending, the borrower offers security against the loan. For an NBFC borrower, that security often comes from the business itself, such as a pool of the loans it has made. The security is central to the raise: it is one of the first things a lender looks at in its diligence, and it is what gives the lender comfort beyond the borrower's own balance sheet.
When a raise is shared by several lenders, the security matters in a second way. Each lender needs to know that its position is backed on the same footing as everyone else's. That is what parity, covered below, is for.
Raising from one lender at a time
Without a platform, a raise is placed one lender at a time. The borrower sends its company information to the first lender, answers its questions, waits for a decision, and then repeats the exercise with the next. Each lender asks for the same material in a slightly different shape. When the next drawdown comes round, much of the work starts again.
That process is slow for the borrower and repetitive for lenders, and it makes funding harder to plan. A treasury team cannot easily line up its next raise when each one depends on a fresh round of conversations.
One proposal, sold down across several lenders
The alternative is to bring one funding proposal and let it be sold down across several lenders. The proposal sets out the amount the borrower needs and the security behind it. Instead of being placed in a single piece, the raise is split into parts, and each lender that takes part holds one of them.
On NBFC Desk, a raise moves through the same steps each time:
- Funding proposal. The borrowing NBFC brings the amount it needs and the security behind it.
- Level 1 diligence. The platform screens the borrower before the raise is shared with any lender.
- Matching. The raise is matched to lenders on their thesis, rate band and risk appetite, and shared only with them.
- Level 2 diligence. Each matched lender runs its own diligence on the same files.
- Sell-down at parity. The raise is split across the lenders who take part.
What parity means
Parity means every lender in a raise gets the same security, the same terms and the same rate. No lender sits ahead of another inside the same raise.
For the borrower, parity keeps a multi-lender raise simple. There is one set of terms for the raise rather than a different arrangement with each lender, and every lender is being asked the same question. For lenders, parity is what makes it reasonable to take part alongside others they cannot see: each lender sees the total raise and how much of it is filled, and only its own position within it.
Where a platform fits
NBFC Desk is a platform for secured NBFC-to-NBFC lending in India. It puts the borrower, the matched lenders and the diligence between them in one place, so each step picks up from the last.
- Diligence held online. Company diligence is collected once and baselined, then refreshed quarterly or when something material changes.
- Matched lenders only. A raise is shared only with lenders whose thesis, rate band and risk appetite it fits. Lenders it doesn't fit never see it.
- Recurring drawdowns. Each borrower draws down on its own cycle, monthly, quarterly or yearly, and every new raise builds on the same file.
- Controlled access. Accounts are by invitation, every sign-in needs a one-time code sent to your work email, and platform data is stored in India, in Mumbai.
The result is a raise that can reach several suitable lenders from a single proposal, on terms that are the same for all of them.