Business loan documents list for proprietorship firm

by Bizopedia · Published February 7, 2022 · Updated June 17, 2022

What is a Business Loan?

A business loan is a loan that is provided by financial institutions such as Banks and NBFCs to a business. This loan is usually taken by MSMEs, SMEs, Self employed individuals and corporates to help in their working capital and growth needs. In this article, we would look into detail the various business loan documents list required by banks and NBFCs for a proprietorship firm.

Business loan documents list for proprietorship firm

Identity proof – Before applying for a business loan, proprietor should make sure that he should have a valid proof of identity for the same. Most popular proof of identity for a business loans includes PAN card, Aadhar card, Voter ID, Driving license. Identity proof is used to establish a identity of the customer as well as for credit burau reporting.
Address proof – A valid address proof is a must have document for a business loan. Valid address proof includes Aadhar card, Voter ID card, Driving license, passport etc. It is to be noted that PAN card is not a valid proof of address as required by business loan documents list by various NBFCs and banks.
Bank Statements – Bank statement are one of the most often asked requirement from lender’s point of view. When you are applying for a business loan as a proprietor then it is understood that most of the transactions would be routed through your banking channels. hence, bank statements are one of the most important items in business loan documents list for a bank. Over a certain turnover, a business might be required to opt for a current account for better operations of his banking relationships. In this case, you would be asked to submit latest 6-12 months bank statement of your business. You should make sure that it is not more than 15 days old from the date of business loan application as it could lead to rejection at the time of initial screening bank employees.
Income Documents – Income documents would include your income tax reruns filed for latest years as well as financial statements such as profit and loss, balance sheet, cash flow statement etc. Before submitting business loan documents list, care should be taken that financial statements are audited by a qualified chartered accountant. Banks asks for these documents to make sure that applicant is financially sound and would be able to repay business loan on time.
Proof of registration – A business registration proof must be provided in business loan documents. With the implementation of GST rule, banks can take GST registration as a valid proof of registration for a business loan. Other registration proofs such as IEC code, MSME certificate, Udyam registration are also valid registration documents for a business loan

It is to be noted that documents mentioned above are just a few major documents form business loan documents list that can be asked by a financial institution. Banks can ask for additional documents to verify your credit worthiness as well as your identity. NBFCs are usually more fleible compared to a bank in requirement for these business loan documents and hence one can approach larger NBFCs for a business loan. But, it should be kept in mind that NBFCs charge a higher rate of interest compared to a bank.

In this article, we have looked into various documents that are required by a financial institution from a proprietorship. It is very important to know the reason for asking these business loan documents list too. If you want to read about business loan documents list for a private limited company then you can visit this link.

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