Documents Required for Business Loan Application

Typically, the Business loan is taken to fund the expansion of a business, the purchase of equipment and machinery, the purchase of inventory, or the increase of operational capital, among other things.

The business loan application process begins with completing the business loan application form. Filling out the business loan application form could be done online or offline. Each lending institution’s application form is different. However, they all request the same information. As a result, it’s great if you’re ready to answer all the questions. Before filling out the loan application, it’s a good idea to have all the necessary information and other business loan documents.

The following are some of the most frequently asked questions:

What makes you want to apply for a business loan?
What will be done with the money from the loan?
What plan do you have in place for repaying the loan?
Who are your suppliers, and what assets do you need to buy?
Who are your debtors, and what additional company debts do you have?
Information about your personal background

Personal information will be required, such as a postal address, PAN, and Aadhar card number, among other things.

Resumes

Some lenders, especially loans that can be used to establish a new business, require proof of experience in management or commercial expertise.

Business Plan

All loan programmes necessitate the submission of a solid business plan together with the loan application. A complete set of expected financial statements, including profit and loss, cash flow, and balance sheet, should be included in the business plan.

Every loan provider regards the CIBIL score as a vital eligibility factor. As part of the loan application process, he acquires the same. You must, however, obtain the same and hunt for inaccuracies that may lower your score. You’ll need a good credit score to get a business loan without collateral.

Business Loan Documents Checklist

The following are the documents required for business Loan that must be presented with the loan application form for a business loan:

Identity Proof: You must give identification documents such as an Aadhar card, a PAN number, a voter’s identity card, and so on.
Residential Proof: This is also a criterion that must be met. You’ll need to show proof of where you’re living, such as an electricity bill or a lease agreement.
Age Proof: Some lenders additionally want evidence of age, which can be provided by a photo PAN card, passport, voter’s card, or other official documents.
Financial Documents: Income tax returns from the past 2-3 years, a bank statement for at least nine months, a profit and loss statement, and a balance sheet are required. You may also need a chartered accountant to audit the PNL account.
Track Credit Score: Knowing your credit score before applying for a business loan in India is critical. Lenders use your credit score to determine your creditworthiness and capacity to repay a loan. A good credit score improves the likelihood of the approval of the application.
Documents preparation: Get all the documentation you’ll need for a business loan in one spot once you’ve figured out what you’ll need. You can receive photocopies of their documents or have them scanned to create an e-copy.

Business loan: Borrower Information Form

Borrower information forms are used to establish a profile of the person applying for a term loan, as the name implies. You must fill in personal information such as name, address, phone number, email, and any other personal information the lender deems necessary. You may also be asked to fill out information such as your company’s details, aims, vision and mission on this form. Basic information may be required with any lender for processing your business loan application.

Financial Information

You must provide your past and financial details as part of the business loan application procedure. When filing a business loan application, everyone who is a small business’s founder, director, guarantor, or authorised person must provide this information to the lender.

Always remember that a business loan is usually a no-collateral loan. The lender will look at your credit score when processing the loan. To determine the borrower’s net worth, the lender would also examine the assets owned by the management and the company. They also check whether the borrower is the sole proprietor or if there are multiple proprietors.

Business Financial Statements

It is, once again, an important stage in the application procedure for a company loan. You must give the lender access to your company’s financial records from bank accounts & various other investments.

Financial statements clarify the company’s financial situation, including sales and earnings. Lenders typically want the firm’s most recent two to three years of financials to assess its current financial health. Balance sheets, profit and loss accounts, and other financial documents are necessary. You can request copies from your Chartered Accountant for the period specified.

Accounts Receivable and Accounts Payable

Most lending programmes demand information about a company’s most recent financial situation. Make sure you have accounts receivable and due before starting the loan application procedure. These reports show how well your clients pay you, whether they pay on time or whether there is a pattern of late payments that could lead to future debt problems. Similarly, the account payable ageing report indicates how efficiently you use your company’s working capital.

ITR(Income Tax Returns) Records

You’ll need to have your most recent tax returns to qualify for a business loan. Lenders usually require the last three years of ITR documents. You can once again approach your CA for assistance in obtaining copies of the most recent ITRs, which will be required as part of your company financing application.

Legal Documents

Relying on the business loan’s unique requirements, your lender may demand you produce one or more legal documents apart from proof of identity. If applicable, double-check that the following things are in order:

To run a business, you’ll need business licenses and registrations.
Articles of Incorporation are the legal documents establishing a company’s legal existence.
Copies of any third-party contracts you’ve signed
Bank statement requirement for a business.
Franchise agreements
Commercial Leases
Organising your documents

Good records are necessary for running a successful business, but they are much more important when applying for a loan. Ensure that all of the needed documents are in order and accurate. Your lender and the organisation that guarantees the loan will verify all the information you give. Providing false or misleading information will lead to the rejection of the loan. Last but not least, maintain personal copies of all loan packages.

How to Choose the Right Business Loan Lender/Provider

Choose a few depending on the paperwork required, business loan eligibility standards, and other pertinent variables. You will save time because you will not have to apply for a loan with multiple lenders before selecting the best one. You should have no trouble getting a business loan if you meet all the requirements. But for selecting the right loan lender, one must first check the interest rates they’re offering & the accessibility of the banking services.

Conclusion

FAQs:

Q. 1 What is required to start your loan process?

Ans. A Minimal Annual Income (ITR) and the above-mentioned essential documentation are required for the business.

Q. 2 What are the essential loan documents?

Identity Proof
Residential Proof
Age Proof
Financial Documents

Q. 3 What are the three fundamental financial statements?

Ans. Income statement, balance sheet, and statement of cash flows.

Checklist of Documents to Consider Before Applying for a Business Loan Application