If you are a self-employed businessperson or professional you will need initial capital to set up your production unit, service centre or office to conduct your business of production of goods and services or giving advice to clients. Once established and when your company has run for a few years, you may need funds to expand your business unit. This is the life cycle of most business until they decide to continue.
If you can source funds from your own savings or internal resources of the business that you run, it is a great way to run a business. Sometimes, you may have to borrow and avail a business loan to meet your funding needs. At such times, you are likely to borrow from banks or NBFCs such as Tata Capital.
Before lenders seek your application for business loans they apprise you of the various terms of the business loans. These include eligibility criteria, the maximum amount of loan extended, interest rates, tenure, repayment options, and a business loan agreement. When you apply for the business loan, you submit the application with supporting documents to prove the credential of your business. Based on these documents, lenders ascertain your eligibility for business loans and the veracity of the information you have furnished in the documents.
You can check out the documents listed below and collect them to attach it with the application form.
The first document is the application form wherein you provide the details of your business – the name of the business, owner, and amount of business loan required, the purpose of the business loan, and business history. You have to attach photographs of owners. The supporting documents would depend on the ownership structure of your business. For instance, if your business is a proprietorship, then your personal details are as important as your business details. Any other form of structure would entail the furnishing information on all the owners along with the information on the business.
Know your customer (KYC) documents are important to recognize you as a genuine borrower eligible to avail business loans. You can prove this by submitting an identity document such as Voter’s ID, PAN, Aadhaar Card, Passport or other documents as prescribed by law. You can prove address by submitting Aadhaar Card, Driving License or any other document prescribed by law.
Since you are applying for a business loan you will need to furnish Income tax Returns for the latest two years for the business. In some case, you will need to furnish individual owners’ ITRs also for the latest two years. You will need to submit other IT documents such as Form 16-A.
P&L Statement and Balance Sheet for two years
Since lenders extend business loans on the basis of the performance of the business you need to submit the audited P/L statement and balance sheet for the latest two years. This will give the financial health of your business to the lenders to assure them that your business is sound and it can repay the business loan along with the interest applicable.
6-month bank certified bank statement
This statement is important to the lender to see how cash flows affect your business and whether you have a sound relationship with your bank.
These documents are necessary to prove you are the owner of the business. This may comprise trade license, bank account statement, registration documents such as partnership deed, certificate of company registration in the case of limited companies along with MOA and AOA. With the introduction of GST, the GST registration certificate becomes important.
Business Vintage for 5 years
You need to provide ownership, registration and trade license documents for the past five years to prove that you are running a viable business continuously for the past 5 years.
These are the basic documents that you need to collect and submit along with your application for a business loan. As you can see, all the documents support the information you have furnished in your business loan application.