Business loans require a long set of documentation to be approved. One of them is ITR forms for the past 2 to 3 years. What if you are a new business and don't have the relevant ITR forms? Can't you get a business loan then? Of course you can! Read on to find alternate documents you can produce to get your business loan approved.
Business loans are loans taken out by businesses to cover a number of expenses such as machinery, inventory, or daily business needs. There are different kinds of business loans; like, secured, unsecured, term, and revolving. They are classified depending upon the financial status of the business and its ability to repay the bank for the loan.
Business loans are offered by commercial banks, finance companies, and online financial services. And these loans have some stringent eligibility criteria. A lot of documentation is required to get a business loan.
One of the primary documents required to process your business loan is your ITR form of the past 2 to 3 years. Banks ask for your ITR forms to corroborate your annual turnover and profit margins. This is a major document for the banks as they need to evaluate your business and financials to make a decision regarding your business loan application!
What If You Are A New Business Or A Start-Up With No ITR Forms?
Yes, that is a common scenario with start-ups and new businesses who have not achieved much business vintage. Business loans are generally only available to applicants with an ITR form from the past 2-3 years, as the banks will use this to evaluate your financial status, business, and loan type (revolving, secured, unsecured, etc.)
However, a new business can still get a business loan from banks with a business loan prospectus. If you are planning to get a loan on the basis of a business loan prospectus, you must submit the following documentation along with your loan application:
Document Required for Business Loan:
- Photograph (passport sized)
- Business plans are often more successful than simple business ideas because they are better-developed and have a higher probability of receiving a loan
- ID proof
- Proof that the business is up and running
- PAN card of business or individual as per availability and requirement
- Incorporation certificate
- Current account bank statement
This way, you can prove to the lender that your business is credible to repay the loan. You can check your business loan eligibility with our Eligibility Calculator before you apply for one.
Who All Can Get For A Business Loan Without ITR?
Business loans can be availed by most borrowers even if they don't have their ITRs -
- Co-operative societies
- Sole proprietorships
What Are The Common Expenses To Be Met By New Businesses And Start-Ups?
Start-ups & new businesses need a lot of money to start functioning and they may require funding for one, a few, or all of their many potential problems and issues.
- Prototype Creation, Product Development, Website/App Development
- Team Hiring
- Legal and Consulting Services for your Start-Up
- Raw materials and equipment
- Licenses and Certifications
- Working Capital
- Marketing and Sales
- Office space and other administrative expenses
Find More About Secured And Unsecured Loans For Your Business
What Are The Alternatives To Business Loans?
Though business loans are the quickest way to capitalize funds for your business, you can check out various government schemes that offer funding for small and medium scale industries, cottage industries, and start-ups. We have listed a few schemes here -
MUDRA – Micro Units Development & Refinance Agency Ltd
- MUDRA has three loan schemes: Sishu loan of up to Rs. 50000, Kishore loan of up to Rs. 5,00,000, and Tarun loan of up to Rs. 10 lakh
- This is a government-sponsored refinance support program for banks and NBFCs to make more money available for lending
- Small business loans for companies engaged in manufacturing, trading, services, tractor finance, agriculture, and allied sectors, as well as two-wheeler loans
- In addition to financial help, they also give non-fund based support to small business organizations through financial literacy and other social support programs
Credit Linked Capital Subsidy Scheme (CLCSS)
- CLCSS is another government initiative focused at enhancing small firms' technology capabilities
- Allows for a 15% capital injection for well-established and enhanced technology
- Funds are largely disbursed through SIDBI and NABARD
- Nine nodal banks have been appointed to participate in the scheme
SMILE – to develop Make In India initiative
- The primary goal is to promote the Make in India initiative
- This loan is available to new and current MSME units in the manufacturing or service sectors that are expanding
- Loans with a Quasi-Equity component
- The minimum loan amount is Rs. 25 lakh
- Attractive interest rates beginning at 8.36%
- Repayment terms of up to 120 months are available
The Credit Guarantee Fund Scheme for Micro and Small Enterprises
- A government flagship program aimed at assisting the MSME sector
- Allows for collateral-free loans up to Rs.10 lakhs
- Retail commerce, educational institutions, agriculture, and Self-Help Groups (SHGs) are exempted, as are new and existing MSME units in the manufacturing or service sectors
Technology Upgradation Fund Scheme for the Textile Industry (TUFS)
- Aims to improve and modernize the textile industry.
- Both new and existing MSME textile units are eligible.
- This scheme's funds will be disbursed through 36 Nodal banks, in addition to SIDBI.
Business loans without ITR is not impossible. If you take the right steps at the right time, it can be done. You just have to prove to the lender that your business can repay back the loan as scheduled.
FAQs How To Get A Business Loan Without ITR:
1:Can I really get a business loan without ITR?
Yes, with modern AI based lending, banks and NBFCs are able to determine your repayment capacity without many of the documents. So you will be able to get a business loan without ITR, provided you submit other income proofs to substantiate your credibility.
2:Is it true that only NBFCs offer business loans without ITR?
Not necessarily. Even banks have started offering business loans without requiring your ITR forms.
3:What other document will help me get a business loan without ITR?
Any kind of document that shows your income can be submitted to get your business loan. For a business, your bank account statement, profit and loss statement, account receivables, are some documents that can prove your income generation capacity.
4:What are the drawbacks of applying for a business loan without ITR?
Delay in processing your loan application; since the lender doesn’t have a comprehensive documentary proof of your income, he has to undertake deeper scrutiny of other documents to ensure your credibility. So your business loan may get delayed.
5:Can collateral or security help me get the business loan without ITR?
Though secured loans are a good option, banks still insist on your ITR forms. But, if you can pledge some substantial collateral, they may consider your case. It is advisable to talk to your banker in person.