What All Documents do I Need to Apply for a Business Loan?

Whether you are running an established business or have just launched your start-up venture, a lack of funds is always a looming challenge. A business owner regularly needs money to purchase machinery, and raw materials, pay wages, and for other working capital expenses. After your resources have exhausted, and the business does not have a cash reserve, you may require alternative sources of funding. One of the most reliable backup solutions is a Business Loan. Banks, NBFCs as well as many financial institutions in India, offer Business Loans, Secured Or Unsecured, to help business owners manage their finances efficiently.

Types of Business Loans

There are several types of business loans and credit lines you may consider:

• Machinery Loan
• Loan Against Property
• Term loan
• Overdraft Limit (OD)/ Cash Credit Limit (CC)
• Working Capital Limit
• Business Credit Cards
• Invoice Financing
• Bank Guarantee
• Letter of Credit

Documents Required for Business Loan

If you want to Apply for Business Loan, the lender would require you to submit several documents along with the application form. These documents help them calculate your eligibility for the loan. Here are the documents that you must submit to avail of a Business Loan:

Business registration documents:

The documents pertaining to the registration of your business are required to determine the date of establishment of the establishment. It also helps the lender assess if all required legal permissions have been obtained.

Following business registration documents will be required:

• VAT/GST Registration Certificate
• Registration under Shop and Establishment Act
• SME/MSME Registration Certificate
• Certificate of Incorporation
• Partnership Deed (in case of a partnership firm)
• Article of Association and Memorandum of Association (Pvt. Ltd. firm)

Income Tax Returns:

You must submit the income tax returns for the last three years along with the application form. It should include the computation of income as well. This will help the financial institutions understand the financial performance of your business over the last few years. If yours is a new venture and are yet to file an income tax return, then you should go for project financing instead of an Unsecured Business Loan; as Income Tax Returns are required mandatorily.

Audited financials:

Along with the Income Tax Return, you also need to submit the audited financials for your business for the last three years. These documents include the Balance Sheet, Profit, and Loss Account, Form 3CB, and Form 3 CD. An auditor must approve all these documents and provide a Certificate for the correctness of the papers.

VAT/GST Returns:

Whether your business falls under the VAT regime or the GST regime, you need to submit the returns for the last two years. GST/VAT returns are required to establish that the turnover mentioned in the Balance Sheet matches the turnover from these returns. Any discrepancy is a red flag for the lender.

Bank Statements:

You need to submit the Current Account bank statements for your business for the last year. This will help the lender understand the financial health of your business and also identify any cheque bounce cases. You must ensure that the account has an adequate balance at all times, and there should not be any instances of cheque bouncing.

Project Report:

Whether it is an unsecured Business Loan or a secured one, you need to submit a project report detailing the reasons for which you require the money. You need to include all the reasons why you need the loan, what will you do with it, and why is that expense necessary for your business. If required, take help from a professional to prepare a comprehensive project report.

CMA Data:

CMA data is the financial data that is prepared by a Chartered Accountant for your Business Loan requirements. This data includes the past, present, and projected performance of the business. It also includes the repayment plan at prevailing Business Loan Interest Rates. This data helps the financial institution get a true picture of your finances and how you intend to repay the money which you are borrowing.

Quotations:

If you are applying for a business loan to acquire new machinery, vehicle or equipment, then you must attach a quotation from the approved supplier. The supplier should be a registered entity.

Application form:

You need to submit a completed application form with all the documents to set the Business Loan process in motion. Fill all the details correctly and sign the application form.

Loan statements:

In addition to your bank statements, you must also provide the loan statements for any existing loans or bank limits that you have. This will help the lender understand your repayment capacity and financial strength to manage financial liabilities.

KYC documents:

You must provide the KYC documents for the business as well as for yourself. For the business, these documents could include the PAN Card, Business registration documents, IEC Code, Rent/ lease deed, etc. For the applicants, partners or directors, personal KYC documents like PAN Card, Aadhar Card, Electricity Bill, Voter ID, etc. will be required.

Financial documents of owner/ partner/ directors:

All the owners, partners, or directors should also submit personal financial documents as well, along with the Business Loan application. ITR for 2 years, Savings Bank Statement for 6 months, net worth statement, or any other documents as required by the lenders.

All lenders require these documents to process the Business Loan application. Therefore, you should prepare multiple sets of these documents before applying for a loan. This will help your application get approved quickly and also present you as a responsible borrower.