Are you a businessman and require a loan to expand or operate your business? A business loan is required so that your business may perform successfully and you can overcome the shortage of funds.
It can help to manage daily expenses, buy equipment and maintain inventory. If you think about how to take a business loan, then the documents required for a business loan must be submitted with the application. Every business has different needs, so the loan varies per your needs and specifications.
The amount of a business loan depends on your business type and need. The process of applying for a loan and the required paperwork is time-consuming. Hence, you must consider a few things before applying for a loan.
Clear Objective - The banks or financial institutions need a financial plan including mission, vision, values, and area of business operation. It would help if you had a clear strategy and explained to the bank officials why you need to take loans.
Funds Usage - The bank wants to know your intention of using borrowed funds. If you need to purchase equipment, look for equipment financing. If you require funds to operate your business, then apply for a loan for a short period.
Purpose of Funds - Before submitting documents required for a business loan, you must evaluate the amount required. The overestimation raises doubts and uncertainties. Hence, prepare a financial budget for estimating your fund's requirements.
Credit Score - The low credit score may impact your chances of getting a business loan. You must maintain a score above 750 by paying previous loan or credit card payments on time. Also, if you encounter any credit score inaccuracies, talk to the credit agency to rectify errors.
Business Loans at Low-Interest Rate- You can review your credit history and CIBIL score. Also, compare the interest rate of different banks and apply for a business loan with a low-interest rate. You can get a business loan at low-interest rates if you have a good credit history and CIBIL score.
Accurate Accounting Records - The bank or financial institution lending loans evaluate cash flow records, capital structure, and income statements. This verification is required to analyze the creditworthiness to repay the loan.
The banks provide business loans for operating and expanding the business at attractive interest rates. Also, the loan-required documents can be submitted wherein they verify the repayment loan capacity of the business person.
The lenders verify these documents by analyzing time, loan amount, and interest rate. If the paperwork is complete and accurate, it may lead to the rejection of the loan application.
You must keep the business loan documents list ready to get a business loan. The documents are discussed below:
Address Proof- Aadhaar card, driving license, passport, PAN card, Voter Id
Income Proof- Bank statement for the past two years
Address Proof - Sales tax certificate, ration card, lease agreement, telephone or electricity bill, trade license, and passport.
Business continuity proof
Financial documents - Past two years' Profit & Loss statement, ITR, income & Loss account, and balance sheet.
Business Ownership Proof- Articles of association, Sole proprietorship, and Memorandum certificate.
Past three years of audited documents
We are discussing the business loan documents list that is mentioned below:
Applicant Identity Proof- PAN Card, Passport, Voter ID, MAPIN card, and driving license.
Application Form- Loan application form with a passport-size photo
Age Proof - Voter card, passport, and PAN card
Residence Proof- Sales tax certificate, ration card, trade license, electricity or telephone bill, lease agreement, and passport
Financial Documents - Balance sheet, Profit & Loss statement, and IT return for past two years audited by CA. Moreover, different documents are required for private ltd & partnership firms, professionals, and non-professionals. We are also discussing the documents required for a new business loan in all the above scenarios.
Individual Identity Proof - The documents must be submitted to directors and authorized signatories. The documents for a business loan are a Voter card, PAN card, passport, driving license, and PAN Card.
Private Limited Company Identity Proof- VAT, sales tax, excise registration, service tax, water or electricity bill, IT returns, municipal tax bill, Registration under the Shops & Establishment Act, PAN card or Memorandum, and Articles of Association must be submitted.
The documents required for the business loan process for self-employed individuals are mentioned below:
Sole Proprietorship Identity - Identity proof for a sole proprietorship
IT return or PAN card of the concerned person, water or electricity bill, or municipal tax.
Sole Proprietor Proof of Residence Address - Driving license, passport, ration card, or Voter ID.
Individual Proof of Sole Proprietor- Driving license, passport, PAN card, or Voter ID card.
The documents needed for a business loan for Self-Employed non-professionals are mentioned below:
The business loan process requires the documents to be submitted with the application. The financial documents include bank statements for last year, and IT returns. The bank also asks for business continuity proof in case of unsecured loans.
Also, tax return with income computation helps the financial institution to analyze the business performance. Certain banks also need P & L statements and balance sheets audited by CA.
The lenders also want to know how the loan amount will be used. For collateral-free loans, you must submit additional documents like a tax audit report, overdraft sanction letter, partnership deed, memorandum, or article of association with an incorporation certificate.
The lenders require a business loan document list to check the authenticity of documents and details provided by the applicant. The financial institution can verify the validity and calculate interest rate, time, and interest rate.
The filled application with financial statements and KYC documents are a must to submit for the business loan process. The bank also requires the applicant's signature on the bank statement for signature verification.
The documents required for the business loan vary from bank to bank; hence, you must contact your bank for more details. You must compare the interest rate offered by financial institutions and select the one offering a low-interest rate per your requirement.
The business needed for a business loan is a PAN card, identity proof like an Aadhaar card, driving license, passport, Voter ID, address proof, ITR with income computation, bank statement for the past six months, P&L, and balance sheet. You must also submit proof of business continuity and other essential documents.
The business loan process is convenient and hassle-free. You can identify the type of business loan, select a lender, check your credit score, fill out the application form, prepare a business plan, submit documents, and calculate EMI.
The business loan details vary from bank to bank. The loan amount can be paid in 48-12 months of duration.
The documents required for a new business loan are a filled application form, financials such as the last three years' balance sheet, P & L account, tax audit reports, and VAT return. You can also submit self-attested KYC documents and bank statements.
The financial documents required are a credit report, business license, personal & bank statement, business plan, personal and business tax return, debt schedule, income statement, accounts receivable & payable, balance sheet, and cash flow statement.
Every bank has a different requirement for a business loan. You must contact your financial institution or bank to check the collateral requirement for the business loan process.