Are you someone who wants to invest heavily in a startup but is falling short of money? Or is your business probably at a stage experiencing great expansion opportunities, but the funds needed will exhaust your company’s profit? So, what do you do in that case? That is when a business loan comes as a shining tool to support all budding and seasoned entrepreneurs running small or medium enterprises. 

However, to avail a business loan from any bank or financial institution, you need to have a complete business loan application checklist prepared, which most importantly includes proper documents. Before applying for a business loan, the borrower would be expected to submit some important documents that serve as proof of identity, financial position and eligibility. Banks assess these documents to verify their business viability, repayment capacity and creditworthiness. Explore this blog to understand the key documents you need and their importance for hassle-free loan approval.

What is a Business Loan? 

A business loan brings ease of quick and wholesome investment for business owners, offering them uninterrupted opportunities for growth and profit. These are loans which work as a debt that you can take for any business purpose, like expansion, purchase of machinery, equipment, inventory, hiring staff, etc. It is offered to the borrower only after they meet a certain requirement and have a creditworthy profile. The entrepreneurs have to repay the loan at a certain interest rate within a specific tenure. These may or may not require any collateral, depending on the lending bank or financial institution. 

Important Documents: Full Business Loan Application Checklist 

A business lending loan from the bank will be expected to provide multiple documents that fall under four main categories. Here is the full list:

1. KYC Documents: 

The KYC documents are mainly to verify the identity and address of the entrepreneur and their business. It includes key details like: 

• Aadhaar Card- Requires Aadhaar card of entrepreneurs or other owners involved in the company for individual verification. 
• PAN Card- You will need PAN cards of different business entities, including your proprietor, partner and directors. 
• Voter ID/Driving license/Passport- These are additional ID proofs for stronger verification. 
• Utility Bills/Property Papers/Rental Agreement- These legal papers serve as address proof for the business and the owner.

2. Business Proof Documents 

A business lending loan will have to confirm whether they are legally registered or operational. To prove the existence of your company, the lender will ask you to submit the following documents: 

• Udyam Registration Certificate- It may or may not be applicable, depending upon the lending financial institution. It is required especially for MSMEs 
• Business Registration Certificate- Submission of various business registration papers, such as the Shop & Establishment Act license 
• Certificate of Incorporation: This is needed for Private Limited and LLP companies 
• Partnership Deed/ Memorandum & Articles of Association (MOA/AOA) 
• The GST Registration Certificate 

3. Financial Documents

Financial documents are a must for every business to avail of a business loan. These legal documents allow banks to evaluate the company’s financial health, repayment ability and income. It comprises: 

• Bank Statements- The business owners will be liable to attach the bank statements of their business bank account for the last 6 to 12 months at least. 
• ITR (Income Tax Returns)- Your ITR details for the last 2-3 years. 
• GST Returns- If applicable for your business type, then you need to attach the GST report for the past 6 to 12 months. 
• Profit & Loss Statement and Balance Sheet- The organisation will have to submit this document, audited by a CA. 
• Cash Flow Projections: It will be required only in some cases, basically for startup businesses. 

4. Other Documents 

The business may also be expected to submit additional documents (as requested by their specific lender) or based on the amount of their loan. 

• Collateral Documents: The entrepreneurs applying for a secured business loan will have to provide collateral documents. 
• Loan Application Form: The financial institutions will ask you to complete an application form and submit the signed document. 
• Photographs: A passport-sized, high-quality photograph of the applicant. 
• Existing Loan Statement: Some banks can request other active loan statements to assess your existing debt. 
• Business Plan: This will be needed mainly for startups and new business ventures. 

Conclusion

Securing a business loan is not a hard job. You just need to have a good hand at your legal documents. And if you are already proud of your credit score and history, then it becomes even easier for your business. So, whether you want to purchase a plant, buy an office space or invest in infrastructure, a business loan comes as a lifesaver. Prepare your business loan application checklist in advance and get undelayed, faster approvals from any financial institution!