There are various types of small businesses which can be promoted by different entities like private limited companies, proprietorship firms, partnership firms or by self-employed professionals and self-employed non-professionals.
All the above types of businesses require funds for growth and expansion. This could be to buy a piece of equipment or machinery, to hire more experienced people, open an office at another location, for working capital, etc.
In case you are engaged as an owner or partner or director or self-employed individual, the most convenient way for you would be to apply for a small business loan. You can either approach a bank or an NBFC for business loans. Since banks mostly offer secured business loans (loans against security/collateral), it is ideal for a business owner to opt for NBFCs that usually offer unsecured business loans.
The list of documents needed for small business loans would differ, based on the types of small businesses.
Different lenders evaluate business loan applications based on different eligibility criteria and documentation. Also, the type of business is also an important factor in determining the documents you need to submit. The list of documents to be submitted will differ based on the type of entity viz., a private limited company or a proprietorship business, a partnership, or self-employed professionals and non-professionals.
We shall now look at the documents for the small business loan to be submitted:
Small Business
Common documents needed when applying for a small business loan are as follows:
- PAN Card
- Aadhaar Card
- Bank-generated account statements for the last 12 months (in PDF format)
- Income tax returns for the previous 2 years
- Latest Balance Sheet and P&L (Provisional)
- Latest Audited Balance Sheet and P&L
- Gumasta/Shop Establishment License
- GST Registration Receipt
- GST Receipts/Challans
- Incorporation Certificate
- Articles of Association (AOA)
- Partnership Deed if the business is in partnership
Private Limited Company and Partnership business
A private limited company is a privately held small business which limits an owner’s liability to their shares. A partnership business is where two or more individuals sign an agreement to carry out the business as co-owners. The risk involved in the business is shared by the partners. Decisions made by one partner affect the entire business. So, if a partner makes any mistake, other partners will also be affected by this.
Documents required for small business loan to be furnished are as follows:
- Proof of identity of the private limited company (GST; IT return; water/electricity bills; PANID/municipal taxes bill in the name of the business; Memorandum and Articles of Association)
- Proof of individual identity for the authorized signatories and two directors including the Managing director from PAN card, voter’s identity card, driving license or passport
Self-employed professionals and self-employed non-professionals
Self-employed professionals are entrepreneurs who work as freelancers. They work at their own expense and risk. Self-employed non-professionals can be shopkeepers and handicraft sellers, etc. They invest money in their business on their own or with the help of a business loan.
Documents required to be furnished for self-employed professionals and non-professionals are:
- Proof of individual identity
- Income tax returns (3 years)
- Copy of periodic stock, debt, and creditors-statement (latest three months)
- Copy of bank statement for last 6 months
Sole proprietorship
In a proprietorship business, the owner alone is responsible for the business and its profits.
Documents required to be furnished are given below:
- Identity proof of sole proprietorship (for sole proprietors or self-employed individuals)
- Income Tax returns, municipal tax, water/electricity bill in the name of the company
- Identity proof of the proprietor (passport, driver’s license, voter’s identity card or a PAN card)
- Address proof of the proprietor (driving license, passport, or voter’s identity card)
Documents required to apply for a Small Business Loan differ depending on the type of business and the criteria of the lender. It is important to carefully understand the list of documents required for the business loan application so that the loan gets approved quickly.
Also Read: Things you need to keep in mind before applying for an MSME loan
