Today, it is possible to get a business loan without filing income tax returns. However, there is a catch. The loans come at higher interest rates and shorter tenures. With many entrepreneurs wanting to build start-ups each day, the need for business loans is now more than it has ever been.
So, while there is no doubt that you will get a business loan for founding your start-up or setting up your business, you should make sure that you file your income tax returns on time.
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Why is Income Tax Returns Important?
Income Tax Returns serve as proof that you have a source of income. Banks and NBFCs use this information to decide whether to grant you a loan and whether you can pay your dues.
ITR serves two purposes:
1. First, it acts as a benchmark for the money that banks can lend.
2. Second, it helps you, as a borrower, get business loans at nominal interest rates.
You should make sure that you file your income tax returns every year to be helpful on these fronts.
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Why Getting a Business Loan Without ITR can be Beneficial?
Getting a business loan without filing your income tax returns can indeed be beneficial. When you start a new business or company, filing for income tax returns can be challenging, especially in the initial days.
You may not have the proper documents, or it could even be that you are out of money as you may be starting afresh after an employment gap. Another possibility here could be that since you have just set up your business or start-up organization, it may not generate enough revenue to cover your loan repayment.
Whatever the reason, if you are about to start a company or business, be reassured that getting a business loan without having to present your income tax returns can be more beneficial than doing so to avail it.
What are the Eligibility Criteria?
Not everyone is eligible to get a business loan without showing their income tax returns to the lenders. However, suppose you are about to set foot into the world of entrepreneurship by starting a new business or founding a company. In that case, you are eligible to avail of business loans without ITR.
Similarly, traders, self-employed individuals, retailers, manufacturers, Limited Liability Partnerships, and sole proprietorship firms are some entities that are eligible to get business loans without presenting their income tax returns.
Other such entities who can apply for business loans include the self-employed and other individuals who are founding a business or start-up company for the first time.
Also, you can ask for a minimum of INR 10,000 and no more than INR 10 Crores. The amount disbursed depends on your requirements and your profile. You should also maintain a credit score of 700 or more to be eligible for these kinds of business loans.
You may not need collateral or a co-applicant here, but the turnover rates may vary depending on the lender.
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What are the Documents Required?
Almost all banks, be it in the private or public sectors, check whether you have filed your income tax returns before processing and approving your business loan. There are only a few such banks and financial institutions that disburse loans without verifying your ITR details.
Also, when you take out your business loan, you must state the purpose. That is, for what you need the money. The most common purposes may include expanding the business or company, purchasing equipment, paying the employees, hiring new staff, training employees, or even paying off any debts.
When you ask for a loan from a bank or other financial institution, they will ask you for a set of documents for verification purposes. These documents may include:
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1. The Application Form
All banks and financial institutions ask you to provide personal information for processing the loan. So, when you apply for a business loan, you must duly fill and submit an application form for the same by providing the information required.
Banks and other financial institutions also ask for a set of passport-sized photographs so that they can verify your identity.
3. Your Business Plan
Since you are about to avail of a business loan, the banks that disburse them may also ask for your business plan. So, make sure you provide them a well-documented one, so they don’t have any trouble when sanctioning the loan.
4. A Valid Identity Proof
You must also provide the lender with valid identity proof, such as your passport or driving license, as it helps them process and disburse your loan.
5. PAN Card
You may also be required to provide your lender with your personal or company PAN details for income tax purposes.
6. Incorporation Certificate
Banks may also ask for the business or company’s incorporation certificate to verify if it exists.
7. MoU or Partnership Deed
You must also provide your company’s MoU details or a Partnership Deed if it is a partnership firm. Similarly, if you have opened a shop, you must give the rent agreement or the Establishment Certificate.
8. Your Bank Account Statements
If you are planning to borrow from a Non-Banking Financial Institution, you may also need to provide your bank account statements to reassure that you will be able to repay the loan.
So, these are the set of documents that all lenders, be it banks or other Non-Banking Financial Institutions, ask for when disbursing business loans.
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Two Easy Ways to Avail Business Loans Without ITR
There are many ways to avail of a business loan without presenting your income tax returns. Two such popular methods include using government schemes and providing collateral.
1. Through Government Schemes
The Government has introduced many schemes to avail business loans without needing collateral or presenting your income tax returns details. You can visit the official Government websites to know more about them.
2. When Collateral is Available
If you are ready to offer collateral but cannot present your income tax returns, you can mention the same when applying for the loan. Doing so will make it easier for the lender to process the loan without requiring your income tax returns.
Many lenders are ready to grant business loans to budding entrepreneurs without needing their income tax returns. They primarily give these loans to small-scale businesses like those of traders.
In most cases, lenders will make do with your bank account statements or collateral if you have one and won’t ask for your income tax returns.
When you apply for a business loan without presenting your ITR details to the lender, note that you will be repaying it at a higher interest rate and within a short duration. You must also provide a strong bank statement that convinces the lender that you can repay the loan.
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