Importance Of ITR For Availing Business Loans
Filing an ITR is very important. Infact, we suggest you to file an ITR even if your income did not cross the exemption limit. Visit IIFL Finance to learn more.
A business loan is an excellent way to meet an organisation's funding needs. However, the application process requires extensive documentation like proof of income, personal information, bank statements, and more. A tax return (ITR) is also an essential document to submit during the application process.Income Tax Return documents contain information about your income and the taxes you must pay in the upcoming year. Lenders require this document to verify your creditworthiness and income status before sanctioning a business loan. This blog discusses why you need an ITR for a business loan.
Why Do You Need An ITR To Get A Business Loan?Here’s why your ITR filing is necessary to get a business loan on ITR:
1. Your ITR Is An Essential Document For Business LoansFinancial institutions require several documents to apply for a business loan, including a balance sheet and a profit and loss account. You must also submit the completed ITR form with these documents for the past three years. These are compliance measures that will strengthen your loan case even further.
2. Filing ITR Shows That You Are Financially ResponsibleThe government requires that you file your income tax return within a specific date. You are demonstrating you are a good citizen by filing the return, which reflects your sense of duty to your country. Filing your returns on time shows the lender that you’re financially responsible and will pay back their dues on time. This way, you’re more likely to get your loan approved.
3. Your ITR Form Helps The Lender Understand Your OrganisationITR lists your business income, interest income from savings and fixed deposits, or a secondary source of income. This document also includes any interest you may have paid for a loan. In general, it provides insight into your business and financial conditions. This information helps your lender determine your business financing eligibility based on your current financial situation.
4. ITR Helps Estimate Your IncomeYour lender calculates your net income through your ITR form. They consider each element of your ITR. When you apply for a business loan, the lender may decide, based on this income, the loan amount you are eligible for or whether you qualify for the loan.
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How To Get A Business Loan Without An ITR Form?While there are many reasons why a business loan requires an ITR, many individuals do not have an ITR. Does that mean they can't get a business loan? Fortunately, that's not the case. Business loans are available without an ITR. Here are a few ways to get a business loan without an ITR.
1. Pledge CollateralObtaining a business loan can be easier if you have an asset you can pledge as collateral. This way, the chances for loan approval and the application process are simpler.
2. Benefit From Various Government SchemesMany government schemes are available for those seeking business loans without ITR. Most of these loans do not require collateral. Among the government programs that offer loans without ITR are the Mudra loan Scheme and the National Small Industries Corporation (NSIC) Subsidy.
3. Improve Your CIBIL ScoreThe lender will look at your CIBIL score even if you have an ITR. Without an ITR form, ensuring your credit score is above 750 may improve your chances of getting a business loan.
4. Apply For A Business Loan With Co-ApplicantsFamily members of the borrower who are professionals are eligible to become co-applicants if they have valid income proof. As a result, you will have a better chance of getting a loan approved.
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Frequently Asked Questions
Q1. Which government schemes provide business loans without ITR?
Ans. Some government loans that don’t require an ITR include
• PSB Loan
• Stand Up India
• National Small Industries Corporation (NSIC) Subsidy
• Mudra Loan Scheme
Q2. Which documents does a financial institution require for a business loan?
Ans. Your Business Loan application must include the following documents:
• Proof of identification: a copy of your Aadhaar Card, passport, voter's ID card, PAN card, or driving license
• Address proof: a copy of your Aadhaar Card, passport, voter's ID card, or driving license.
• Statement of bank account for the last six months
• A copy of the most recent ITR
• Any other mandatory documents
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