What Are the Documents Required to Get a Business Loan?

An organisation planning to apply for a business loan must be thoroughly aware of the general application process and the documents that need to be provided to the lender. Security is a top concern for any business today, and no enterprise will want to give copies of their ID and financial papers to questionable entities.

Even when they choose to borrow from familiar banks, the hassles of printing and photocopying documents, submitting them to a branch personally or through a reliable employee and then awaiting approval of their SME loan can be tedious. It discourages many MSMEs from approaching traditional financial institutions for funds. “How to get fastest business loan” while also following a secure procedure is a priority for SME and MSME borrowers.

Fortunately, the expectation of getting a quick business loan can now be fulfilled by FinTech lenders. These digitally active NBFCs have an abridged and systematic online application process, and funds on approved applications are provided in less than a week. Furthermore, they offer loans without requiring the borrowers to pledge any security.

FinTechs do need some documents to sanction any loan. However, businesses only need to submit the soft copies with their digital application. The primary documents required for an unsecured working capital loan or any other SME/MSME loan include:

KYC Documents of Business Owner(s) – PAN Card, passport copy or a copy of any other Photo ID that is recognised by the Government of India

Income Tax Returns (ITR) – The processed ITR document copies for the last two years

Goods and Service Tax (GST) Returns – Processed returns for the past year

Bank Statements – For the previous six months

For some particular loans taken to finance the operations of schools, medical clinics, restaurants, franchises, logistics companies and e-commerce sites, the FinTech lender may need documents specific to these verticals.

As an example, a Pvt Ltd company or LLP that seeks merchant cash finance based on the payments made through cards should also submit its card settlement statements for three months preceding the loan application. On the other hand, sole proprietors (Prop) running their own shops, salons or small restaurants can directly submit their KYC documents, IT returns, bank statements and papers that corroborate the identity of their business.

What then, about the security factor here? That indeed is important – a business loan application should only be sent from a secure website that encrypts all information loaded on its servers. FinTech companies with website domain having a lock symbol and https:// prefix are authentic lenders in the credit market.

If your business has been successfully running for almost three years, and you have been complying with the tax laws of India, your chances of fulfilling other eligibility requirements for an unsecured business loan by Capital Float are high. Just gather the soft copies of documents relevant to your enterprise, and by spending less than 15 minutes on the digital application, you can send a request for the loan. You will also be notified of the approval on the same day, and the funds reach your bank account in the next 72 hours.

Apply for Unsecured Business loan

To know more about our loan granting process, feel free to call at 1860 419 0999.

More Related Posts

Card image cap
Tax Computation – 2 regimes

India’s Minister of Finance and Corporate Affairs Smt. Nirmala Sitharaman, on February 1, 2020 tabled the Union Budget for the FY 2020-21 in the Lok Sabha. She announced a new income tax regime in addition to the existing one, to provide relief to individual taxpayers. 

However, this new regime is optional and the taxpayers can choose between the old and the new, basis their suitability. The new regime has foregone certain deductions and exemptions. The tax rates have been reduced, but taxpayers will have to forego exemptions when choosing the new tax regime.

Let us take a look at the tax rates of individuals whose age is less than 60 years under both the regimes:

Income tax slabsTax rate (Old Regime)Tax rate (New Regime)
Up to 2.5 lakhsNilNil
2.5-5 lakhs5%5%
5-7.5 lakhs20%10%
7.5-10 lakhs20%15%
10-12.5 lakhs30%20%
12.5-15 lakhs30%25%
Above 15 lakhs30%30%

From the above table, it is evident that the tax rates are lower in the new regime than the old regime. But, there is a list of exemptions and deductions that has to be conceded by the taxpayers. This list includes but is not limited to the following:

i) Leave Travel Allowance (LTA)

ii) Conveyance

iii) House Rent Allowance (HRA)

iv) Uniform Allowance

v) Helper allowance

vi) Professional tax

vii) Standard deduction

viii) Other special allowances [Section 10(14)]

ix) Interest on housing loan (Section 24) on self occupied property

x) Chapter VI-A deduction (80C,80D, 80E and so on) (Except Section 80CCD(2) and 80JJA)

Savings calculation based on income

PARTICULARSOld Tax Regime(Rs.)
Gross Income15,00,000
Less: Deductions- 
      U/S 80C (Investment in PPF)1,50,000
      U/S 80D (Medical Insurance – Self, spouse, children)25,000
      U/S 80TTA (Interest Income from Savings account on a bank)10,000
Taxable Income13,15,000

TAX ON TAXABLE INCOME (OLD TAX SLAB)(Rs.)(Rs.)
At normal rate, on the income of Rs. 13,15,000:  
Up to 2.5 lakhsNil 
2.5-5 lakhs @5%12,500 
5-7.5 lakhs @20%50,000 
7.5-10 lakhs @20%50,000 
10-12.5 lakhs @30%75,000
12.5-13.15 lakhs @30%19,500 
Total 2,07,000
Add: Cess @4% on Rs. 2,07,000 8,280
Tax Liability 2,15,280

From the above illustration, it is evident that taxpayers can reduce their taxable income by investing in tax saving instruments such as Provident Fund, Medical Insurance, etc. that appear as deductions under section 80C to 80U of the Income Tax Act, 1961.

PARTICULARSNew Tax Regime (Rs.)
Gross Income15,00,000
Less: DeductionsNil
Taxable Income15,00,000

TAX ON TAXABLE INCOME (NEW TAX SLAB)(Rs.)(Rs.)
At normal rate, on the income of Rs. 15,00,000:  
Up to 2.5 lakhsNil 
2.5-5 lakhs @5%12,500 
5-7.5 lakhs @10%25,000 
7.5-10 lakhs @15%37,500 
10-12.5 lakhs @20%50,000 
12.5-15 lakhs @25%62,500 
Total 1,87,500
Add: Cess @4% on Rs. 1,87,500 7,500
Tax Liability 1,95,000

From the above illustration, having regard to the income level and the deductions being claimed by the taxpayer, it is possible that taxpayers can save money because of the low tax rates of the new regime, however the same needs to be evaluated on a case-to-case basis.

Tax rates under both the regimes for senior citizens

Tax rates for individuals whose age is 60 years or more but less than 80 years (Senior citizens):

Income tax slabsTax rate (Old Regime)Tax rate (New Regime)
Up to 2.5 lakhsNilNil
2.5-3 lakhsNil5%
3-5 lakhs5%5%
5-7.5 lakhs20%10%
7.5-10 lakhs20%15%
10-12.5 lakhs30%20%
12.5-15 lakhs30%25%
Above 15 lakhs30%30%

Tax rates for individuals whose age is 80 years or more (Super senior citizens):

Income tax slabsTax rate (Old Regime)Tax rate (New Regime)
Up to 2.5 lakhsNilNil
2.5-5 lakhsNil5%
5-7.5 lakhs20%10%
7.5-10 lakhs20%15%
10-12.5 lakhs30%20%
12.5-15 lakhs30%25%
Above 15 lakhs30%30%

The Government has offered two types of regimes for tax computations for individuals– the old and the new system. The taxpayers should scrutinize and study both systems before opting for one. They should take into consideration their salaries, expenditures, savings, etc to select the system that is suitable for them. 

Disclaimer: This blog post is based on the provisions of the Finance Act,2020 as passed by the Parliament. Any subsequent notifications have not been factored into this post.

Oct 24, 2018

Card image cap
How You Can Improve Your Cash Flows With Supply Chain Finance?

SMEs are sometimes cash-crunched to provide credit to their customers. These customers often ask for 30-60-90 day credit after raising an invoice. Due to the absence of negotiating power, SMEs are often arm-twisted into accepting delays in payment. The gap in cash flows resulting from delayed receipts affects the performance of a company and its ability to run smoothly.

Such situations can now be easily avoided by using Supply Chain Finance, which allows a business to raise the necessary funds by using its receivables. Read on to know more about how supply chain financing can be a powerful tool for boosting the cash flows of your business.

When is Supply Chain Invoicing Needed?

Businesses offer a credit period to customers after executing an order and raising an invoice, since this helps them establish a stronger relationship with customers, build customer loyalty and receive recurring orders. While on one hand, SMEs need to deal with delayed payments from clients, they do not have the negotiating power to delay payments to their suppliers. Moreover, they need funds to make overhead payments and provide salaries to their employees. Even the most profitable SMEs may face cash crunches due to the time lag between having to incur expenses and actually receiving payments from clients.

If not fulfilled in time, this shortage of funds can weaken the smooth functioning of the business. This is where supply chain invoicing for small businesses comes to the rescue. The invoices are like an asset for a business, and can be used to overcome cash flow issues. Supply chain invoicing uses the accounts receivables of a business as a means to increase liquidity.

Invoice Factoring Versus Supply Chain Invoicing

There are two ways in which a business can use its invoices to infuse cash into its operations: invoice factoring and supply chain invoicing. With invoice factoring, a business sells its outstanding invoices, often at a significant discount, to a third party. Supply chain invoicing allows a business to use its outstanding invoices as collateral to secure a loan. Often businesses do not prefer invoice factoring since they do not like the idea of a third party contacting their clients to recover an invoice. This can have a bad impact on the relationship between an SME and its customers.

Supply Chain Invoicing for Small Business 

If a small business has outstanding invoices, it can use these to inject cash into its operations. Capital Float’s Supply Chain Finance product does exactly that. The best news is that the benefits do not end there.

Fast Loans: For any business, especially an SME, timing of receiving funds is critical. Using cutting-edge technology, FinTech companies like Capital Float are able to meet the most urgent working capital needs of small businesses. In fact, the Supply Chain Finance product uses data-driven criteria to approve a loan within hours and disburse the sanctioned funds within just three days.

Convenient Application: One does not need to visit a financial institution and stand in any queues to apply for supply chain invoicing from a FinTech lender. One can apply online, at any time and from anywhere. With such options available, an SME can say goodbye to the hassles of obtaining a loan from a traditional bank. The application process for Supply Chain Finance is so smooth and easy that one can complete the application form even while traveling from home to the workplace. What’s more, Capital Float has a mobile app that makes the application process even easier. The complete process involves filling up a form and uploading the required documents, which takes less than ten minutes.

High Loan Amounts: An SME can receive as much as ₹1 crore to inject into its business. From as low as ₹1 lakh to as high as ₹1 crore can be secured to be used as working capital or to fund the growth of a business. An SME can borrow as much as 90% of the value of the outstanding invoices. One can use the supply chain finance calculator to get an idea of the amount the business can borrow.

Flexible Loan Tenure: With Supply Chain Finance, one can have a repayment plan between 30 – 180 days. The greatest feature is the one time bullet repayment option, which allows a business to repay the loan in one go, thus reducing the interest burden. Else, the business can repay the loan in easy monthly instalments.

Minimum Documentation: In order to Apply for Supply Chain Finance, a business would need digital copies of only a few documents. These include audited financials for the past couple of years, VAT returns and bank documents for the past six months, KYC documents of the business owner and the SME, invoices for the last three months and sales ledger for the last six months.

Do you raise invoices and then need to wait weeks or months for clients to pay? Did you know your cash requirements could be met with supply chain financing?

Now a business can secure the required financing without pledging any assets. The invoices are all that a business needs to infuse cash immediately into its operations. Revolutionary products like Capital Float’s Supply Chain Finance have helped solve the cash flow problems of many businesses. Moreover, being technology driven, there is complete transparency in the fees for this service. There are no hidden costs in acquiring this loan product.

Oct 24, 2018

Card image cap
Top Reasons Why Unsecured Business Loans Are Becoming Popular

During the lifecycle of a business, there are times when the inadequacy of working capital threatens the flow of operations and hinders growth. Traditional lending institutions in India such as banks rarely provide assistance in such situations, as they generally demand collateral, which small business and young entrepreneurs may not possess. An unsecured business loan can take care of routine business expenditure such as maintenance of machinery, making payments to suppliers and purchasing raw material. It can also be useful for business expansion activities such as purchasing new machinery or expanding premises.

Moreover, all small and medium enterprises need funds to seize new opportunities for growth, and the window for such opportunities is usually small. In such a scenario, there is a need for quick access to funds. The loan repayment schedule also needs to be synchronous with the expected revenue flow from a business venture. Hence, an unsecured business loan taken from a FinTech company works best for them, as it is disbursed much faster than a loan from a bank. Further, these FinTech companies ensure that an SME is always at ease while paying the loan instalments.

Unsecured loans are turning extremely popular amongst small businesses communities. These are a few reasons why.

They help strengthen the business finances

A suitable business growth opportunity can present itself at any time, and therefore a small business needs to have access to adequate resources at all times. In case the cash flow situation is imperfect or there is a working capital requirement to meet routine business expenses, it helps to take an unsecured loan for a short period until the situation improves. This ensures that a small business will never find itself at a disadvantage when a new opportunity presents itself. Such loans from FinTech companies do not come with any prepayment penalty, and their tenure can vary from a few months to a couple of years.

Faster approval and quick access to funds

The digital revolution and the subsequent development of IT systems and processes have led to the rise of new age FinTech companies over the past five years. FinTech companies in India follow a completely different approach to the unsecured business loan market, as they use innovative technologies to profile, design and disburse loan products for small businesses. Even the application for an unsecured loan can be made online or through the mobile app, and all supporting documents such as bank statements, tax statements, previous loan statements, KYC documents, business receivables and other relevant documents can be uploaded in digital format. The use of advanced analytic techniques allows these companies to process a loan application within minutes. Upon approval, the loan amount is transferred to the borrower’s bank account within a few working days.

An unsecured loan product for every business

Extensive use of technology enables FinTech companies such as Capital Float to design new loan products that are meant to fulfil varying business needs. The loan product, Term Finance, is meant for small businesses that have been in operation for more than two years and have been doing good during that period. Such businesses can take business loans from ₹1 lakh to ₹1 crore for a duration of a few months to three years.

Supply chain finance is meant for small businesses that have blue-chip companies as customers. Such businesses can take up to 80% of the pending invoice value as an unsecured loan. The loan can be repaid either as monthly instalments or at one go upon receiving payments from the customer.

Unsecured loan products designed to support digital economy

Online Seller Finance is another loan product from Capital Float that is designed for businesses that generate revenue through e-commerce marketplaces. It provides up to 200% of the monthly sales volume as advance to such businesses. This money can be used to accelerate business growth online.

Similarly, merchants that receive the bulk of their payments through PoS terminals can avail up to 200% of their monthly card settlement value as advance through a customized finance product called Merchant Cash Advance. The loan amount can be repaid through the deduction of a fixed percentage from card settlements in the subsequent months.

Get loans on the most favourable terms

Capital Float offers loans at the most competitive rates. These unsecured loan costs can be brought further down by choosing the right loan product. Capital Float charges a flat 2% processing fee for all their loan products, and there are no other hidden charges. Another great benefit is the flexibility offered in loan repayment, which is linked to the business receivables.

Indeed, new age technology driven FinTech companies have eased the pain in procuring funds from the unsecured loans market in India, and small businesses can look up to them as a partner in their business growth.

At Capital Float, we fully understand the business challenges faced by small businesses and have therefore designed the unsecured loan products in such a way that businesses can focus more on business growth rather than on worrying about getting business finance. Our customised plans ascertain that you get just the right product that suits your unique need.

To find out the product that best suits your business, click here.

Oct 24, 2018