Off late this is the most common question we have been asked, what all documents are required while attempting to avail a business loan or a working capital loan?
While providing a loan to you a bank needs to perform its Know Your Customer (“KYC”) check. What it means is financial institution needs to look at the identity and address proofs to confirm the genuineness of their customers and perform credit assessment to grant you a loan. As financial institutions are regulated entities, they need to perform KYC on all of their clients as per regulations by Reserve Bank of India (“RBI”). Below is a simple guide to solve your documentation questions:
1. Identity Proof –
- PAN Card
- Voters Identity Card
2. Address Proof –
- Bank Statements
- Electricity Bill
- Telephone Bill
Or any one of the below: (these are considered as both Identity and Address proofs)
- Driving License
- Aadhaar Card (Obtain a soft copy of your Aadhaar here)
3. Business Continuity Proof – any of the below
- Income tax returns – Its good to have computation of income and Profit & Loss, Balance Sheet copies also.
- Trade License
- Shop Registration Certificate (also known as Gumatsa License in Maharashtra)
- SSI Certificate/ Udyog Aadhaar (You can register your business online here)
- VAT /Sales tax /Service tax certificate/PAN card
4. Bank Statements – Usually current account and savings account bank statements of last 6 months depending upon availability.
5. Other documents – Irrespective of the submitted identity proof, PAN card of the entrepreneur and if available of the business is required.
Registered partnership deed(for LLPs/Partnerships), memorandum and articles of associations(for private ltd companies) would be required depending upon the constitution of the business.
Working capital loan – While wanting to avail a cash credit limit or over draft, a summary of your debtors and creditors (for a working capital loan) and stock statement is good to have.
Mortgage loan / Loan against property – Requires property documents like registered sale deed, occupancy certificate.
Business plan or Project report – This is the most ignored part of the loan process. If you were trying to apply for Mudra loan or credit guarantee fund trust for micro and small enterprises (“CGTMSE”), or any other subsidy/scheme bank would definitely ask you for one. For other kind of loansfinancial institution may or may not ask you for this, but for the sake of building a profitable business, you must make one.So what is a business plan? We will discuss this part in our subsequent post…