What is a business loan?
A business loan is a loan taken to start a new business venture or to grow a business.
A person / company can avail either a secured loan which is obtained against collateral or an unsecured business loan which is a loan without collateral.
Collateral is basically an asset against which the loan is taken from the lender (bank or financial institution).
New trade loan
Starting and operating a business has become very difficult in this increasingly price-competitive world and proves to be more difficult, especially for new start-ups or new companies. In fact many start-up companies have to close their businesses mid-way due to lack of funds or lack of steady flow of income.
Funds are very essential for a new business and for the operation and expansion of pre-existing businesses as funds are required to cover the initial capital investment, working capital and day-to-day expenses of the business.
Therefore, a need arises for trade credit / new business loan.
How to get a business loan
Typically, to apply for a business loan, a person / company must submit an ITR or collateral as well as other documents.
The ITR is the proof of income that acts as a guarantee for the lender to get the least interest.
How to get a business loan without ITR
Individuals or start-up companies face challenges to apply for business loans due to non-availability of ITR. And to protect them, at present, various institutions offering business loans without ITR exist in the market.
To obtain a business loan without ITR, the requirements of business loans that an individual needs to present may vary from one institution to another, but they are almost identical and are as follows:
A good credit score – This is mandatory for all business loans (nothing but credit scores, how much credit is taken by the applicant as the credit history of the applicant, repayment history, etc. It helps lenders decide. How much loan is to be given and it also provides an indication on the loan repayment capacity of the applicant. The higher the credit score, the higher the loan amount will be given.)
An identity proof
A detailed, well-designed, and well-documented business plan
Business registration copy
A copy of the rent agreement
A copy of the bank statement
Passport size photo
Business loan without ITR becomes much easier if it can be applied against collateral but does not have to be collateral again.
Individuals / companies should note the following while deciding to apply for a business loan without ITR:
- The highest rate will be much higher than regular business loans.
- The loan repayment period will be comparatively short.
- The bank account should have higher than average monthly balances that show reasonable savings.
- Terms and conditions, interest rates and loan repayment periods are compared to the periods being offered by many lenders to compare before making a choice.