Professional loan: Do you want to apply for a professional loan? Here is a checklist of the documents you will need

India is on its way to becoming the fastest growing country in the world and it has taken several steps to attain the status of a $5 trillion economy in the near future. The rapid adoption of new era technologies and the emergence of MSMEs are two of the many foundations shaping the country’s growth. With government initiatives to promote local startups and small businesses, several entrepreneurs are moving forward to start their own ventures to provide products and services to the Indian market. Regardless of their offerings or business structure, at some point or another they need a loan to facilitate their operations efficiently. They may need funds to meet business needs, meet customer needs, or purchase an asset (machinery, raw materials, etc.).

Different business needs have different requirements, but the documents for applying for a loan remain the same. To save time and reduce the likelihood of being rejected by banks, here is a list of documents a small business should prepare before applying for a loan.

Small Secured and Unsecured Business Loans: Eligibility and Types of Loans Available:
Before collecting the required documents, small business owners must qualify for the loan and must know how much they need for their needs. Taking excess loan amounts could lead to overspending, and a lower amount might not meet the needs of the business. Therefore, the exact amount must be calculated beforehand in order to request the exact amount.

Second, the eligibility criteria of different institutions are different. For example, banks may refuse a loan and, at the same time, an NBFC or MFI may initially accept it. However, the documents must be complete and legitimate, and they must reflect the business as a whole. Eligibility criteria generally include minimum turnover from Rs 10 lakh, legal age of the applicant (over 21 and under 65), minimum business activity (2-3 years) and a good credit rating (CIBIL) in most cases.

Based on the above criteria, MSMEs can opt for business loans such as unsecured loans, which can provide capital from Rs 50,000, with a minimum tenure of 12 months and a CIBIL score of 650.

Another type of loan is loan against property, which includes holding a residential or commercial property as collateral to obtain a loan amount of a minimum of Rs 1 lakh with varying tenures as per specific businesses. These types of business loans can be approved for business expansion, working capital, debt consolidation, purchase of office machinery or tools, or for personal use.

Documents required for a business loan
MSME owners expect to have a simple application process for their loan application, as well as transparency, a personalized loan offer and minimal documentation hassles. However, a minimum number of documents are still required to successfully apply for a loan and be accepted.

Primarily, the form should be filled accurately with a recently clicked passport size photo. The main requirements include:

KYC documents:

* Adhar card

* Driver’s license

* Voter ID

* Panoramic map.

* Proof of address which may include: passport, Aadhar, utility bill, rental agreement or any proof of ownership.

* Half-yearly bank account statement

Business Proof Documents:
* Proof of activity

* GST returns

* Two years of RTI for personal and business income.

* Proof of qualification for SEPs

* Registration documents

* Work address

Small business owners should ensure that these documents are original and are provided to financial institutions when applying for a loan.

All things Considered
Having a realistic business growth projection is something every small business owner should consider as it will help speed up the process of growing with the loan amount disbursed. Initially, before applying for a loan, companies must accurately calculate the requirement in detail.

Obtaining the necessary documents is the first step for MSMEs when applying for a loan. There can be several reasons why loans can be rejected and documents are one of the main reasons. Therefore, keeping a company health record is industry best practice. Furthermore, audited financial statements can facilitate the approval process for the lender as well as for the MSME.

(The author is MD, CEO and Founder of Save Solutions)

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