Business Loan Documentation Checklist – 12 Documents To Keep Handy
Are you an individual finally giving wings to your entrepreneurial calling, or are you perhaps a company looking to expand its business but facing a cash crunch? Then it is likely that you are actively considering applying for a business loan, which can be a viable option if lack of collateral is a concern.
But before you initiate the application process for a business loan, there are a couple of things you might want to consider. One, your personal and your company’s credit score. Since business loans are typically unsecured, a high credit score becomes imperative for a successful loan application. Second, a clear understanding of your funding requirements and how the loan amount will be utilized. This transparency ensures that both you and the lender are on the same page in terms of the business requirements.
Post consideration, it is time to designate a folder that will specifically hold all the documents that you will need to apply for a business loan. The checklist has been enlisted below:
1. Business Loan Application Form
Any loan application starts off with the filing of a business loan application form, which is typically provided to you by the lender. For instance, Protium offers both an online process for initiating your business loan application as well as a provision to apply for loans at any of its branches located across the country.
A business loan application form usually entails information regarding the name, nature, and address of the business along with details of the founders, such as their names, addresses, personal background, loan history, etc. Information regarding the purpose of the loan and repayment plans will also need to be furnished.
2. Borrower Information Form
A borrower information form seeks to purvey the personal details of the applicant. You will need to render the following documents:
Personal Identity Proof: Aadhaar card/Passport/PAN card/Voter’s ID card/Driver’s license.
Address Proof: Aadhaar card/Passport/Voter’s ID card/ Ration card/telephone bill/lease agreement/electricity bill.
Additionally, you may also be asked to render information regarding your organization, including its mission, goals, and values.
3. Personal Financial Statements
Due to the collateral-free nature of business loans, lenders are heavily reliant on the applicant’s credit score. This requirement becomes even more acute if you happen to be a proprietor or a partial owner of a small business. You will be required to list down all your assets and liabilities on a form to enable the lender to better understand your history with investments and estimate your approximate net worth.
4. Business Financial Statements
You will be asked to furnish your company’s financial statements, including the balance sheet and P&L account for the past 3 years that have been audited by a CA at the time of business loan application. This must be accompanied by tax audit reports, schedules & notes to accounts, and GST Challans. The lenders require this information to verify whether the business’ computation of income actually adds up and if it is viable to loan it the money.
5. Business Continuity Proof
A business loan application will also require proof of the existence and continuation of the business for which the loan is being sought. Trade License, Establishment Certificates, Service Tax Certificates, GST Registration, or previously filed ITRs are generally accepted as proof of continuation of a business.
Your license and establishment certificates, such as a sole proprietorship declaration or a certified copy of a partnership deed, will vary as per your business type. You might also need an additional license depending on the industry and state in which you are based.
6. Your Loan Application History
In order to get a better perspective about your repayment capability, the financial institution may enquire about your previous loan application history. A lender will be concerned about whether you have previously applied for a loan if it was rejected, and the rectifying measures you took post rejection to evaluate if you are a worthy candidate for sanctioning of a business loan.
On the business front, lending institutions will take into consideration the loan history of both the business and its directors, i.e., any loans that were taken in the past, and the repayment record.
7. Income Tax Returns (ITR)
You will need to furnish both personal and corporate ITR records of at least the previous 3 years to the lending institution. You will need to be careful about the authenticity of the statements and if these are in sync with your previously rendered financial statements.
8. Director/Partner Resumes
You and your partners will need to submit resumes that have been tailored to the business loan application process. It generally requires information about educational background, professional history, achievements, and goals. It is an opportunity for you to showcase your business acumen and prove your ability to successfully run your business.
This requirement will apply to all the directors as well if your business has been established as a company.
9. Business History and Overview
A business overview that accurately explains the history, plans, and objectives of the business will have to be shared. For this, a company can submit its memorandum and articles of association that have been certified by all the directors. An original business resolution should also be submitted that showcases the intention of applying for a business loan.
You can leverage your business overview document to showcase your business’ USP and how it can outperform its peers.
10. Bank Statement
You will be asked to provide personal and corporate bank statements for the last 6 months, extendable to a year’s worth, to better gauge your financial position and repayment ability. Bank statements enable the lending institution to profile your personal and organizational purchasing habits.
11. Lease Agreement/Occupancy Certificate
If you are looking to acquire a property, then you will need to provide details of the occupancy certificate, tax receipts, as well as a sanction plan for the said property. In case you are looking to lease a place, then you will need to provide a copy of the lease agreement. This requirement can be completely dispensed with if you plan to run your business digitally.
12. Receivables and Payables
Depending on your type of business, financial institutions may additionally require information on your major suppliers and customers along with their contact information. The lenders will also evaluate your receivables and payables cycles to understand your working capital requirements and utilization.
The lending institutions can additionally require more documents for submission, in case of a franchise agreement or if your business is an MSME looking to invest in priority sectors. These specific document requirements will differ from lender to lender.
Wrapping Up – Apply now for a Business Loan anytime, anywhere
After you have gathered all your paperwork, apply for a business loan from a lender that meets your specific demands and requirements.
In case you are looking to apply for a business loan online with quick disbursal rates and minimal documentation, you can apply at Protium. Or call 8828827800 to find out more!