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03 Mar
  • Editorial Team
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Every form of business, whether large or small, startup or an MNC, requires funds. Funds boost a business and give it the essential push to grow and develop. To cater to the emerging needs of businesses, banks and financial institutions are offering business loans that are customized for each specific situation.

A business loan is the financial help given to businesses to meet the requirement of funds. It provides an access to credit, which can be paid back over a specified period of time. There are various advantages of business loans which include convenience and easy access, multiple loan options, lower rate of interest, long and flexible tenures as well as tax benefits. For many, Commercial business loans are the preferred way to finance your business today.

Documentation required: Below mentioned documents are required for a complete loan application:

  1. Business Plan: For a business loan application, a business plan will be on the top of the requirements. A business plan includes a summary of your business with the financials, technical projections and business strategies for the future. All the financial goals, in terms of sales, income, cash flow, profit, etc. should be reflected in the business plan. Nowadays, a business plan is considered as a mandatory document for the business loan application process.

  2. Promoter/ Director Resume: Many a times, the lenders look to partner with businessmen who have the acumen to make a business profitable and to repay the loan with ease. Hence, it is important to provide the personal profile or resumes of yourself as well as other members of the management. Update the resume and include all the important information that will help convince the lender.

  3. Promotor/ Director KYC: KYC documents have become essential for any form of borrowing. Each and every loan application requires the KYC documents of the promoter or the director of the business. KYC documents generally include an identity proof, an address proof and additional identification documents, if any, held by the applicant.

  4. Bank Statements: A lender will be interested in perusing the financial position of your company. Bank statements reflect this in the most appropriate manner. The reason behind this is to ensure that the business has enough funds to maintain the operations and to repay the borrowed amount. Certain lenders ask for the bank statements for the last two years while some require the statements only for a period of three months.

  5. Financial Statements - P&L, Balance Sheet: The balance sheet reflects your assets and liabilities, while the profit and loss account reflects on how you have put them to use. These statements show how profitable your business was during a specific period of time. The lender will specifically look into the cash flow to determine your ability to repay the borrowings. These statements help the lender in tracking the business income and to learn about the profitability of the business.

  6. Income/ Other Taxation History - ITR, Service Tax, etc.: Income tax history provides a lot of credit information to the lenders. These documents are extremely dependable when the lender wants to ensure that you will be able to repay the borrowings within the specified time period. Any business, young or old, requires the submission of income tax returns for further processing and quick approvals.

Now that you are aware of the importance of business loans as well as the documentation required for the same, it is time to look for lending institutions that are suitable for your needs. Scout the market to learn about the terms and conditions offered by various lenders and choose a reliable and trustworthy partner to fund your business.

Did You Know

Disbursement

The act of paying out money for any kind of transaction is known as disbursement. From a lending perspective this usual implies the transfer of the loan amount to the borrower. It may cover paying to operate a business, dividend payments, cash outflow etc. So if disbursements are more than revenues, then cash flow of an entity is negative, and may indicate possible insolvency.

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