Every business requires funds for growth and expansion. This could be to buy a piece of equipment or machinery, to hire more experienced people, to open an office at another location, for working capital, etc.
The most convenient way would be to apply for a small business loan. A small business owner 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.
Different lenders evaluate business loan applications based on different eligibility criteria and documentation. Also, the type of business you have will also have a bearing on the documents you need to submit. If you have a Pvt. Ltd. company or a proprietorship business, business with a partnership, the individual is self-employed professionals and non-professionals, the list of documents you need to submit will be slightly different for each.
Before we get into the details of the list of documents needed for a business, let us first understand how these businesses are different from each other.
Understanding The Different Types Of Small Businesses
Private Limited Company
- A private limited company is a privately held small business which limits an owner’s liability to their shares.
- Limit of the shareholders is 50.
- The shareholders cannot sell or transfer their shares without first offering them to other shareholders for purchase.
- The shareholders also cannot offer their shares to the general public.
Proprietorship business
- In a proprietorship business, the owner alone is responsible for the business and its profits.
- There is no interference from any other external parties.
- The income is taxable in the name of the proprietor.
- There is no audit for such kind of a business unless the receipts reach a particular limit.
Partnership business
- A partnership business is where two or more individuals sign an agreement to carry out the business as co-owners.
- If the assets of the business fall short to meet the company’s obligations, the partners’ private assets will also be used.
- No partner has the right to transfer his/her share to any outsider without taking the permission to do so from the other partners.
- The risk involved in the business is shared by the partners.
- Taxation rates applicable to a partnership business are lower than proprietorship business.
- Decisions made by one partner affect the entire business. So, if a partner makes any mistake, other partners will also be affected by this.
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.
Now that we know the difference between the different kinds of small businesses, let’s take a look at the documents needed for each of them when applying for a small business loan.
Common Documents Needed When Applying For A Small Business Loan
- 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
List Of Documents Needed For Self-Employed Professionals And Proprietorships
- Proof of identity of the sole proprietorship (for sole proprietors or self-employed individuals)
- Income Tax returns, municipal tax, water/electricity bill which is in the name of the company
- Identity proof of the proprietor (passport, drivers license, voter’s identity card or a PAN card)
- Address proof of the proprietor (driving license, passport, or voter’s identity card)
List Of Documents Needed For Self-Employed Non-Professionals
- Proof of individual identity
- Income tax returns (3 years)
- Copy of periodic stock, debt, and creditors-statement (latest three months)
- Copy of bank statement of last 6 months
List Of Documents For A Pvt. Ltd. Company Or Partnership Business:
- 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
It is important to note that the list of documents needed for small business loans would differ, based on the types of small businesses. Make sure you first check the eligibility criteria and list of documents of the lending institution before making an application for a business loan. This will make it easier for you to get a business loan faster!
If you want to take a loan for your small business, a good option would be to contact Gromor Finance for quick loans at affordable interest rates!
