List of Documents Required For Small Business Loan
List of Documents Required For Small Business Loan
A list of questions comes to one’s mind while applying for a small business loan. What paperwork is required to obtain a business loan? What kind of paperwork is needed for a business loan? How long ought the business loan processing to take? A company loan is a straightforward approach to getting money to handle any financial issues. The funds secured in the form of a business loan may be utilised for a variety of purposes, including business expansion, inventory maintenance, office rent, staff recruiting, raw material purchases, and new venture startup.
There are a lot of banks and non-bank finance companies (NBFCs) that offer loans to small businesses loans with easy repayment terms and low-interest rates. But each lender has different requirements for who can get a loan and what they can lend. To get a business loan, borrowers must also show several other documents.
When you apply for a loan at a bank or NBFC, you have to fill out a lot of paperwork. Loan applications could be delayed or even turned down if some documents are missing or if they have the wrong information.
It is wise to be aware of the list of supporting documentation required for small business loans from banks and NBFCs before applying. The majority of the paperwork is standard, while the exact list may vary from lender to lender.
1. Common documents.
Even though different types of businesses and business loans require different sets of documents, some documents don’t change. These have “Know Your Customer” documents like proof of a company’s existence, incorporation certificates, partnership agreements, etc. PAN cards are another thing that all types of small business loans need. The company’s PAN card, as well as the cards of its owners, partners, and other important people, must be turned in. The proof of address documents come in third on the list of documents that people often need. Again, you will have to show proof of the addresses of both the business and its owners.
2. Bank statements.
When applying for an SME business loan, bank statements are a crucial component of your application. If you are a first-time borrower, you will often need to furnish statements dating back the previous six months. However, if your lender knows you have a history of borrowing from them, they might ask for statements going back up to a year.
3. Documents for SMEs
These typically include the paperwork required for sales tax, VAT, and service tax registration. plus exercise. Additionally, you will need to submit the company entity’s IT returns. and the company’s utility expenses. Additionally, if necessary, you might need to provide things like the Memorandum and Articles of Association, the Bill for Municipal Taxes, etc.
4. Self-employed or Proprietor Documents
The first item on the list is evidence of a sole proprietorship’s identity. The next step is to provide your PAN card, IT returns, and utility bills in the business’s name. You must present one of the following as identification: a passport, a driver’s license, or a PAN card. The last requirement is address verification, which can be done with a driver’s license, passport, or voter ID card.
5. Financial Documents
Small business loans, both secured and unsecured, need proof of income like tax returns and recent bank statements. For some unsecured loans, having proof that a business is still running can be helpful.
Lenders can figure out how well a business loan has done by looking at tax returns and income calculations from previous years. Some banks also need a certified accountant’s audited balance sheet and profit and loss statements from the business’s last two years. The goal of the balance sheet is to give a clear picture of the company’s assets and liabilities.
Lenders sometimes ask how loans will be used for business loan plans. If needed, applicants must include supporting documents like budgets and projections of future cash flows. To do this, borrowers need to think about two possible futures: the first must show how a business will do without more money, and the second must show how the loan will help the business grow.
Additionally, borrowers looking for loans without collateral might need to provide the following documents:
• A letter from their bank about authorising an overdraft
• Partnership Agreement
• A certificate of incorporation and a memorandum of association or articles of association
• Audit reports for taxes
The Different Types Of Small Businesses: A Private Limited Company
1. A private limited company is a privately
• Small businesses where an owner’s responsibility is restricted to their shares
• The maximum number of stockholders is 50.
• Shareholders are prohibited from transferring or selling their shares without first making them available to other shareholders for acquisition.
• Additionally, the stockholders are prohibited from selling their shares to the public.
2. Proprietorship businesses
• In a sole proprietorship, the owner is solely accountable for the operation and its financial success.
• No intervention from any other outside party is present.
• The proprietor is responsible for paying taxes on the income.
• Unless the receipts reach a certain threshold, there is no audit for such a business.
3. Self-employed professionals and self-employed non-professionals
• Professionals who work for themselves as independent contractors are entrepreneurs. They take on the danger and expense of their work.
• Self-employed non-professionals can work as store owners, artisans, etc. They either put their own money or money obtained through a business loan into their venture.
Summing-up:
For a business loan to be approved, loan applications must be properly filled out, and KYC documents and financial statements must be provided as proof. Banks and NBFCs can also get the applicants’ signatures on bank statement verification forms so they can check the signatures.
Before applying for a small business loan, borrowers must have all of the necessary financial documents. This is true no matter what kind of loan they want. The paperwork you need to get a loan can vary from one bank to the next. So going to a trustworthy lender like IIFL Finance can make the process easier.
Also, visit Piramal Finance for more in-depth educational articles.