A business loan is approved for the purpose of starting a new business, expanding an existing business, purchasing assets, etc. Most entrepreneurs are unfamiliar with how to apply for a bank loan or the procedures involved. Here we describe how to obtain a bank loan. To simplify matters, entrepreneurs should understand what banks demand from them.

Before approaching a bank, prepare the following documents:

1. KYC documents include your identifying details. Always carry your identity cards, such as PAN, AADHAR, Election ID card, Ration card, driver’s license, and passport. Please take at least three photocopies of any of the same (ideally Aadhar and PAN), and also carry the original.
2. Company registration data – Your identity details of the business, such as registration details, whether it is presently functioning or going to establish a new one, you must complete the registration procedure to acquire a loan. MOA/AOA, Partnership deed, Panchayath/Municipality/Corporation registration information, Licenses issued for your firm, such as FSSAI, pollution, and boiler licenses, as required by your industry. Rent agreement, GST registration (if relevant), and so on.
3. Project report – When applying for a bank loan, you should have a project report that clearly explains your business, why you need the funds, how you plan to repay the loan, your business location and infrastructure facilities, projected profitability, balance sheet for the next 3-5 years, and so on.

   

4. Photograph – When applying for a loan, you should bring your photograph with you. If there is a group of people, carry all of the stakeholder images.
5. Source of capital – The bank will only issue 75% of the total project cost, with the entrepreneur contributing 25% of the money, also known as margin money. Sometimes you need to send the margin money data. For example: funds from friends or family, etc.
6. Personal Credit Score – This is historical data on your previous bank loans, financial liabilities, and how well you return them. People commonly refer to it as a CIBIL score, Experian score, and so on. You do not need to carry this; the bank may verify it using your Aadhar details. If you need to know about this, you can check your credit score for free on Cibil or Experion websites.
7. Due diligence certificate – The bank manager creates this document by cross-checking your information with other enterprises or society. Your background, experience, and so on will be documented there.