How To Get A Business Loan Without Income Tax Returns?
Acquiring a business loan without ITR can be difficult, Check out some ways on simplifying the process and improving your chances of getting an instant business loan.
Business loans can be a saviour for entrepreneurs looking for extra funding to support their ventures. These loans help pay for various expenses, including machinery, inventory, or daily operating expenses. However, obtaining a business loan requires a lot of documentation, including ITR forms from the past two to three years. They are essential to process your business loan as they are proof of your annual turnover and margins to lenders.But what if you start a new business without any ITR forms? Can you then get a business loan without ITR? Yes, you can! This blog highlights the alternate ways to get a business loan without ITR and income proof.
Business Loan Eligibility CriteriaThe essential eligibility criteria for a business loan are as follows:
• Business loans are available to individuals, cooperative societies, companies, sole proprietorships, NGOs, trusts, limited liability partnerships (LLPs), traders, retailers, manufacturers, partnerships, etc.
• Self-employed professionals, start-up enterprises, and first-time business owners are also eligible.
• A borrower cannot be under 22 years old when applying for a business loan.
• The borrower's age shouldn't exceed 65 years at loan maturity.
• Depending on the applicant's profile and business requirements, a minimum of Rs. 10,000 and a maximum of Rs. 10 crores loan is permitted.
• Ideally, you should have a credit score of at least 700 and as close to 900 as possible.
• The business’s turnover rate varies among lenders and is determined solely by the lending institution.
• It is unnecessary to provide collateral (except for equipment financing, bill sale, letters of credit, etc.)
Documents Required To Avail Of A Business Loan
• Application form duly filled out
• Photographs of passport size
• Detailed business plan
• Proof of identity: Voter's ID card, passport, driver's license
• Proof of existence and address of the business
• Individual, partnership or company PAN cards
• Residence proof: driving licenses, voter identification cards, passports, electricity bills, bank statements, and rental contracts.
• Certificate of Incorporation of the Company
• MoA (Memorandum of Association) or Partnership Deed
• Rental agreements and certificates for shops and establishments
• Bank statement for the current account
• Income tax return of the past 2 or 3 years
Why Are Income Tax Returns Important?The Income Tax Return serves as proof of your income. NBFCs and banks use this information to determine whether you are eligible for a loan and whether you can pay your debts back.
ITR serves two purposes:
1. It sets a benchmark for how much banks are willing to lend you.
2. It enables you to get nominal-interest business loans.
How To Get A Business Loan Without ITRHere are a few tips for applying without an ITR business loan:
1. Maintain A Healthy Credit ScoreAny loan application requires a good CIBIL score. If you have a high credit score, you can prove your creditworthiness to the lender, even without the required ITR. Hence, when applying for a business loan, ensure that your CIBIL score is at least 750.
2. Opt For A Government SchemeThe government has introduced various loan schemes to assist first-time business owners. Thus, you don't need collateral or ITR to qualify for these business loans. Among these schemes are:
• Mudra loan
• PSB Loans
• Stand-up India
• NSIC (National Small Industries Corporation) Subsidy
• PMEGP (Prime Minister’s Employment Generation Scheme)
3. Apply With A Co-ApplicantIf your mother, father, partner, or any other close family member earns a stable income, you can include them as a co-applicant for the loan. If you do this, the lender will likely approve your loan application.
4. Apply With CollateralYou can pledge your property or land as collateral when applying for a business loan. This option simplifies the loan application process and increases your chances of approval.
5. Borrow From An Unofficial LenderSome unofficial lenders are willing to provide a business loan without an ITR. However, it is necessary to note that their policies and terms may differ considerably from those of conventional lenders/business loan providers.
Note: Ensure you thoroughly research the lender before borrowing to avoid becoming a victim of a scam.
6. Apply For A Personal LoanSmall business owners with no ITR can apply for personal loans for self-employed instead of business loans. A personal loan has fewer eligibility criteria and is usually easier to obtain than a business loan.
Get A Business Loan From IIFL FinanceWe, at IIFL Finance, believe that every business owner should be able to borrow business finance. Hence, we provide loans without ITRs and collateral to budding entrepreneurs, relaxed eligibility requirements and longer repayment terms. Take your business to the next level with a business loan from IIFL Finance!
Frequently Asked Questions
Q1. Is it true that only NBFCs offer business loans without ITR?
Ans. No, not necessarily. Banks are also increasingly offering business loans without requiring ITR.
Q2. Without an ITR, what other documents will I need to get a business loan?
Ans. To file for a business loan without ITR, you must submit any document showing your income. You can prove your income generation capacity with documents such as your bank account statement, profit and loss statement, and account receivables.
Q3. What are the disadvantages of a business loan without ITR?
Ans. Lenders will need to check other documents to confirm your credibility since they do not have ample documentary proof of your income. Hence, there may be a delay in approving your business loan.