Sufficient capital is required to run and expand any business. Being unable to make prompt payments and purchases can prevent you from capitalizing on opportunities that come into the market. This is where business loans come as an important resource for entrepreneurs. A business loan can help you keep your operations running smoothly even when you face temporary cash shortages.
Whether you need to expand your business, buy equipment or office space, pay rent or salaries, hire employees, consolidate debts, manage inventory, increase stock, invest in infrastructure, procure raw materials, or start a new or small business, you can choose between secured and unsecured loans to meet your financial needs.
When you borrow a business loan, the financier will ensure that your business can generate enough money to repay the debt. They will look at the size of your business. Additionally, several other documents are needed to proceed with the loan. This article specifies the eligibility criteria and documents required for a business loan.
Secured vs Unsecured loan
The document submission of the business loan depends on the loan type you choose. There are two types of loans secured and unsecured. When you take a business loan where you provide an asset, including your property paper or other business assets, as collateral to the bank, you take a secured loan. On the other side unsecured loan is borrowing money from a loan lender without giving any pledge security.
However, secured loans are considered a good choice as they will be charged lower business loan interest rates than other unsecured loans.
Documents Required for Business Loan Application
The checklist of the document includes the following:
Official Application Form
The first and foremost process for getting a business loan is to fill out the official application form provided by the respective bank or financial institution. Attentively and correctly fill out the application form by mentioning all the details and attaching a passport-sized photograph.
Borrower’s Proof of Identity
To borrow a loan, identity proof is a must. You can provide a PAN card, Aadhar card, Voter’s ID card, passport, or driving license as proof of your identity.
Residence Proof
For residential proof, you can provide a Voter’s ID card, telephone bill, electricity bill, or Aadhar card as proof of address.
Age Proof
To borrow a loan, you must fulfill the age eligibility criteria. You can present a Passport, PAN card, Voter’s ID, or other personal documents that show your age.
Income Proof
The lender always first evaluates whether what is your source of income and whether you will be able to repay the loan on time. Hence it is necessary to provide your income proof. An income tax return (ITR) of 2-3 years, an account statement, and the balance sheet might be required.
These are the generic and external business loan documents that you will require.
Eligibility Criteria of Business Loan
To obtain the loan, the borrower must meet the criteria. The borrower:
- Should be of 18 years and more.
- Should be a citizen of India.
- Should have maintained a credit score between 700-900
- Should incorporate
- Should register the business as a private/public limited liability company, LLP, or sole proprietorship/partnership.
Conclusion
Business loans are a great help to entrepreneurs if they want to capitalize and extend or start a new business. But before applying for a Business Loan, it is important to read through the Business documents and checklist them carefully.
