What are the Benefits of Getting a GST Business Loan?

Darsh Sharma, a sole proprietor, runs a general store at one of the posh locations in Noida. Now, he wants to expand his business by setting up a new outlet in his hometown, Moradabad. However, his plans of availing of small business loans from a reputed financial institution did not work out. Plus, he does not have any assets to put up as collateral and his shop is rented space. This is when one of his acquaintances suggested taking a loan based on the GST filings. Surprised by the suggestion, Darsh is now interested in learning more about GST business loans. If you too are interested in GST loans for MSME, then this article is for you. 
 

What are GST Business Loans? 

 
GST business loans or GST loans are unsecured financing solutions in which the lender provides a loan without asking for security. The lender examines your GST returns to determine the worthiness of your profile, and depending upon your tax filing, the lending institution sanctions the loan accordingly. To avail of GST based business loan, you don't need any additional financial documents. As such, the loan process is quick and convenient. 
 

How do GST Business Loans Work? 

 
The GST business loan functions in the same way as any other loan type; it is only the basis on which this loan is approved that differs. When applying for an unsecured business loan, the lender examines your audited financial accounts such as your balance sheet, profit and loss statement and so on. However, in the case of GST loans, the fundamental document based on which your loan is approved is your GST return. Just like any other loan, a GST loan must be repaid along with the interest amount over time. 
 
Also Read: Everything You Need to Know About Getting A Small Business Loan Without Collateral
 

Benefits of Getting a GST Business Loan: 

 

• Collateral Free Loan: 

One of the most typical issues that small businesses experience when seeking SME loans is that the lender either denies them a loan due to a lack of collateral or requires them to submit a mountain of paperwork to get their loan approved. Under the GST loan, by submitting your returns and KYC documents along with a few essential business details, you can easily get a business loan on the GST number. 
 

• Quick Disbursal: 

As a business owner, you may not be in a position to wait days for your lender to verify your documents and approve your loan. A delay could hamper your production and operational cycle, or you may lose out on some great business opportunities. In such situations, if you have your GST documents in hand, just go to the preferred lender website, upload your documents and take advantage of the instant MSME GST loan scheme. 
 

• Keep Control of Your Business: 

Does your business require funds for equipment purchase? Or does it need funds to expand its presence? Whatever the case be, if you file your GST on time, you will have no trouble getting your loan authorised. The GST business loan allows you to take control of your business by allowing you to access cash whenever you need it. As GST mandatory for business loans, just make sure you file your returns on time. 
 

• Multiple Purpose Loan: 

While approving GST loans for MSME, lending institutions do not ask you to mention the loan purpose. Funds availed through GST business loans can be used for any business purpose. You can use it to meet your working capital requirements, business expansion, and equipment purchase, among other things. 
 

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• Working Capital Requirements: 

When your business cycle faces difficulty due to lack of working capital, apply for GST based business loans and get immediate funding in your account. 
 

• Lack of Financial Documents: 

It is okay if your business documents are not updated or are not in place. Don't panic. If you have filed your GST on time, you can still acquire a business loan based on it. Not having financial papers ready does not mean you don't have them in the first place. Lenders look for a bare minimum of financial records in addition to your GST return when approving your GST loan.
 
Also Read: Factors That Determine Your Business Loan Approval
 

Who is Eligible to Take GST Business Loans? 

 
As the name implies, the loan is available for business purposes only. Private limited companies, public limited companies, partnership firms, and sole proprietorships are all eligible to avail of a GST loan. Furthermore, depending upon the nature of your business, previous credit history, and GST return amount, the interest rate on GST loans may vary from one business profile to another. 
 

Documents Required for GST Loans: 

 

• Mandatory Documents: Duly filled loan application form along with the PAN Card copy and latest GST return invoice. 

 

• Address Proof: Voter ID card/ Driver's Licence/ Aadhaar Card/ Rent Agreement/ Passport

 

• Business Continuity Proof: GST Registration/ Company Incorporation Certificate/ Trade Licence/ Business PAN

 

• In case you need funds over Rs 20 lakh, you need to furnish the last two years’ audited financial statements such as balance sheet, profit and loss statement along with the last two years’ ITR. 

 

To Conclude: 

 
Many financial institutions in India offer business loans, but many firms still find it difficult to obtain a loan owing to insufficient documentation and lack of collateral, among other reasons. The situation becomes worse for a person planning to establish a business. This is where the GST business loan comes in handy. With the help of this business loan, you can easily expand your business and can meet your business’s other financial needs as well.