What Are the Documents Required to Get a Business Loan ?

It is possible to manage the cash flow, upgrade business equipment and grow the business by the option of business loans. Each bank has specific requirements, criteria and eligibility factors. Here is the list of few banks document requirements and other details mentioned.
To avail a business loan, an applicant needs to provide the following documents as per the lender's requirements.

• Identity Proof: Driving License / PAN Card / Passport / Voters ID Card / Aadhaar Card.
• Address Proof: Ration Card /Telephone Bill / Electricity Bill / Passport / Trade license / Lease agreement / Sales Tax certificate.
• Income Proof: Bank Statement of Last 2 Years.
• Financial Documents: Last 2 Years ITR along with computation of Balance Sheet, income & Profit & Loss a/c for the last 2 yrs.
• Proof of Business Continuation
• Business Ownership[ Proof: Other Mandatory Documents such as Sole Proprietorship Declaration, Certified true copy of Memorandum & Articles of Association
• Last 3 years audited financials.

Why And When Should You Apply For Business Loan?

India is home to tens and thousands of micro, small and medium scale businesses. Every business here is distinct in its own way. However, one critical factor that dominates every business here, irrespective of its type and sector – is the requirement for finances.
No matter what segment the business belongs to, at some point every business will come across the time when it will need to secure funding. And when it comes to procuring business funding then certainly business loans can’t be denied for. Business loans are the most effective tools to provide businesses a quick infusion of capital.
But taking a business loan isn’t that easy. Finding reasons, for what exactly a loan might be needed for and right time, when, you can’t perhaps do it without a loan- has to be ascertained before you proceed to take out a loan. Well, how to decide? To know more let’s dive through this article

Know More About Tax Benefits On Business Loans In India?

• Interest Repaid on a Business Loan Is Tax-Deductible 

The interest component of your business loan is tax-deductible. You can deduct this amount from your gross income while calculating the income tax of your business. Make sure to maintain the correct records of your business loan, so that you can submit proof if later requested by the income tax department.

• Principal on Business Loan is NOT Tax-Deductible 

The principal amount you borrow in a business loan is not tax-deductible. You cannot deduct this sum from your gross business income while calculating the year’s taxes.
However, the principal amount is not money earned by your business. What you are doing is essentially borrowing money from a third-party and repaying it. Hence, it is not considered as income for your business.
This means you don’t have to include it in your gross income. You don’t have to pay income tax for this amount, nor can you deduct it from your gross income.
Now, that you are clear about the tax implications of business loans, you have to understand,

• Tax Deductible Expenses for Businesses

Tax-deductible expenses work in favour of your business. These are expenses that can be deducted from your gross revenue or profits, thereby helping you lower your taxable income. Simply put, these expenses are subtracted from your overall business revenues for the year, before you compute your tax liabilities.

• Business Loans Taxation Rules: In a Nutshell 

The loan interest amount is tax exempted, if you can show proof that it was used for a business-related expense like purchasing equipment, inventory, etc. The principal amount does not offer any tax benefits as it is not tax-deductible. However, it doesn’t increase the overall taxes you pay, as you don’t have to include it in your gross revenue.

What Are The Benefits Of Business Loans?

Taking up a business loan India offers a number of benefits to the borrower. 

• The loaned amount can be used to serve various business purposes.
• Easy and flexible repayment options offered by various NBFC’s (non-banking financial institution) make the loan reimbursement a bit more palatable.  
• The distinct customized loan types offered by lending institutions can be used to meet the varying demands of the business as per the requirements. 
• The interest paid on business loans is tax-deductible due to it being termed as a business expense. This reduction in interest payments lightens up the borrower’s tax burden.