Documents & Formalities for Business Loans
The submission of documents is an essential part of business loans. Without the documents and the credit score, banks cannot provide loans to the borrower. Thus it is a crucial part of the loan process. Banks typically charge interest rates of 11%-24% per annum to the borrower. The interest rates vary from lender to lender. The borrower should first evaluate the interest rates charged by the lender, and accordingly, only based on the affordability should the borrower avail of loans from the lender. The existing lender and the new aspirants who want to start up their businesses can be helped by the business loans. The terms & conditions mentioned on the form should be read thoroughly by the borrower before opting for the loans. Suppose the terms & conditions are found misleading or else totally against the interest of the borrower. In that case, the borrower should ask for a change in the terms & conditions or avail the loans from another lender with favorable conditions. The Government of India encourages the banks to provide startup loans or else MSME loans to the borrower. Thus the aspiring entrepreneurs should take advantage of the benefits of loans provided by the banks.
While applying for a new business loan, the loan applicant should have a concrete plan regarding the business activity being carried out. The borrower should have some reserve funds, which should be disclosed to the lender before the approval of loans. The loan applicant also requires surplus funds to fulfill other requirements like paying salaries to the staff, paying the premises’ rent, and making available surplus inventories.ETC. Loans can also be availed for the expansion of business. The business expansion needs are like buying a new premise, stocking up more inventories, purchase of new machinery.ETC. Business loans can help the borrower gain returns on investment multiple times in the case of asset. The borrower should ensure that they should have some savings or else mortgages with them before getting loans approved. As in other cases, the loans opted to turn into loss then in that case still the borrower has to repay the loans to the lender. Failing which the banks may charge heavy penalties against the default or else may also seal the assets. Also, the CIBIL ratings may get spoilt, thus leading to the cancellation of loans to the lenders.
Following are the documents required for the business loans:
The borrower has to fill up the application form provided by the lender along with the passport size photograph.
Proof of identity:
- Aadhar card
- Voter id card
- Pan card
- Passport
- Driving license
Address Proof:
- Passport.
- Electricity bill
- Ration card
- Property documents
- Registered rent agreement
- Telephone bill
- Trade license
Financial documents:
- Copy of income tax returns filed for the past one year
- Bank account statement
- The charted accountant signs the balance sheet of the profit & loss statement
Business ownership proof:
- Shop act registration proof
- Company pan
- Electricity bill
- Municipal property tax bill
- Income tax payment receipt
Ownership proof of partnership entities:
- Partnership agreement
- Income tax returns
- GST filing returns
- Identity proof of partners
Ownership proof of private limited companies:
- Certificate of commencement
- Registration certificate of private limited entities
- ITR returns proof
- Shop registration certificate
- Identity proof
Eligibility of business loans:
The borrower should have all the above documents which are mentioned above while applying for the loans. The loan applicant’s age should be minimum of 21 years and a maximum of 65 years as of the date of application. The CIBIL score of the borrower should be a minimum of 700 points to avail loans at lower interest rates comparatively. In case of a lower credit score, the banks may reject the loans or charge higher interest rates to the borrower.
Thus, the borrower should note the documents displayed above and submit them to the banks. The banks cannot approve the loan application of the borrower without the necessary documents. The borrower’s credit score also plays an essential role in the approval of the borrower’s loans. The registered entities can only be provided loans by the banks; thus, in starting a new business and availing of loans, the borrower should first complete the registration formalities before applying for the loans.
