The business environment of today has become dynamic, fast-paced and competitive. Therefore, prompt financial support and access to business loans has become imperative. However, many entrepreneurs find the documentation procedure complicated and daunting when applying for loans. Fortunately, digitisation and the availability of business loan online have made the documentation process faster and convenient.
A thorough understanding of the procedure and required documents can make the application process smoother and more straightforward. In this article, we shall understand the various kinds of documentation needed to obtain a business loan.
Proof of Identity and Address
Lenders need to verify the applicant’s identity and address to ensure credit is provided to the right person. This also helps assess the applicant’s creditworthiness and determine the loan amount.
- KYC Documents
Personal identity proof of the business owner, each partner, or director, as the case may be, and security providers or guarantors are needed to verify their identity and nationality in the process of business loan applying. These documents are necessary for the same.
- Permanent Account Number (PAN) Card
- Aadhar Card
- Passport
- Voter ID
- Proof of Business Address
These documents can be used for necessary correspondence and verification of the place of business.
- Rental Agreement or Ownership Deed
- Utility bills
Proof of Business
The legitimacy and structure of your business need to be ensured before loan approval. Various documents can provide proof of business.
- Certificate of Incorporation (for companies)
- Partnership Deed (for partnership firms)
- GST Registration Certificate
- Trade Licence
Maintaining consolidated digital copies of these documents can be helpful, especially when applying for a business loan online. Business proof documents can vary for different kinds of enterprises. For instance, an MSME may be required to provide Udyam Registration, and sole proprietorships can furnish a Sole Proprietorship Declaration.
Financial Documents
Assessment of the financials of your business is an imperative part of the loan approval procedure. Valid and authentic financial statements and other documents are needed to attest to your business’s actual financial position for the lender’s perusal and determination of loan amount and tenure. These documents give a picture of the financial health of your company and its ability to repay the credit.
- Audited Financials
Bank account statements, statements of profit and loss, balance sheets, notes to accounts, tax audit reports and statutory audit reports of periods prescribed, usually of the previous three financial years, are required when applying for a business loan online or at the bank.
- Current Year Performance and Projected Turnover
Analysis of the current year’s performance and projections for the future based on the same can be required by some banks.
- Income Tax Returns
Copies of previous income tax returns and the computation of income can be furnished.
- CIBIL Score
To determine the creditworthiness of an applicant, lenders usually check the CIBIL score (Credit Information Bureau India Limited), also known as credit score. Usually, a CIBIL score of 650 to 700 is sufficient to obtain a secured loan from most lenders. In case of unsecured, the minimum required score is usually 700.
Other Documents
Documentation requirements differ, depending on the lender and the loan type. Business loan mobile apps also require a real-time e-KYC. Some banks may require a Loan Purpose declaration. While soliciting a secured loan, one is also needed to provide the property documents of the collateral. In case of joint loans, the same documents need to be furnished by the co-signer.
Conclusion
Meticulous and well-organized paperwork can help you speed up and streamline the loan approval procedure. With fully digital processes, applying for business loans is swifter and easier. Maintaining your documentation is the first step towards a smooth application process.
Bajaj Finserv’s minimal documentation requirement and online application process make loan disbursal easy and transparent. You can get a loan up to ₹80 lakhs with a customisable tenure of up to 96 months, depending on your requirement, preference and eligibility. Flexible eligibility criteria and simplified documentation in business loan online allow you to take your business to the next level.
