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From startups to or large corporations, one of the most common challenges all business owners face is a lack of funds to meet business requirements. However, borrowing business credit can help meet such requirements but this may require a plethora of documentation including income proofs for loan approvals. This list of documents prominently involves submitting Income Tax Returns or ITRs, which can pose a significant problem for new entrepreneurs who haven’t filed ITRs yet.
Luckily, the good news is that it’s possible to get a bank loan without income proof. It means even if you’re new and don’t have all the usual paperwork, you still have viable options to get the business funds you need. On that note, let’s explore these alternatives, understand the role of ITR in traditional business financing, and more.
Exploring bank loans without income proof
This is where bank loan options without income proof come in. In case you are unable to show your income proofs such as ITR, there are other ways to get a business loan. And led to the emergence of alternate lending funds. These include collateral-based loans (secured loans against assets).
For instance, if you own a property/land, you can easily pledge that as collateral when applying for a business loan. It will surely help you improve the chances of loan approval and make the process simpler.
Some banks might let you use different papers instead, like your bank statements or a plan showing how your business will make money in the future. There are also special loans where you can use something valuable, like property or equipment, as a guarantee. This means if you can’t pay back the loan, the bank can take the item you used as a guarantee. Lastly, there are places other than banks, like microfinance institutions, that might give a bank loan without income proof to help small businesses or startups.
Apart from this, it also includes loans based on business performance or future contracts, microloans from non-banking financial institutions, credit score-based business loans, and even peer-to-peer lending platforms. Also, there are various government schemes and grants that can be considered while availing a bank loan without income proof for your business. As, in many cases, there are no collateral requirements.
For instance, the Mudra loan scheme offered by the government is one such example that offers loans without income proof. Besides, the other schemes include, Stand-up India, Public Sector Bank Loans such as PSB loans in 59 minutes, etc.
Also read: Business Loan for YouTubers
What is an ITR?
ITR stands for Income Tax Returns (ITRs). These are documents you need to file with the tax authorities. It includes details regarding the income of your business and the taxes paid thereon. In business finance, these documents act as evidence of the financial health and stability of a business. When businesses need a loan, lenders (banks) usually look at these documents as a reliable, government-verified record of financial transactions. It further helps in assessing the creditworthiness and repayment capacity of the business. But what if you don’t have an ITR yet?
Comparing business loan interest rates of different financial institutions 2023
Here’s a list of all the financial institutions in India providing business loans without income tax return (ITR) documents:
|Name of the institution
|Bank statement required
|₹1 lakh -10 lakhs
|1.5% – 2% Per Month
|1 to 36 Months
|₹1 lakh -15 lakhs
|19% – 25% Per Annum
|12 to 48 Months
|IDFC First Bank
|₹1 lakh -9 lakhs
|19% – 24% Per Annum
|12 to 48 Months
|₹1 lakh -20 lakhs
|18% – 21% Per Annum
|12 to 36 Months
|₹1 lakh -20 lakhs
|19% – 22% Per Annum
|12 to 36 Months
Note: However, these are the details of all the financial institutions based on the information available as of 2023, yet they are subject to change. So, for the most updated and accurate details, it is recommended to visit the official website of the respective financial institutions and confirm before applying for the same.
Documents required for bank loans without income proof
Let’s understand the documents required, eligibility criteria, and who can apply for the Bajaj Finserv bank loans without income proof.
Bajaj Finserv is one of the known financial institutions. It grants business loans to new businesses and doesn’t ask for any ITRs from the borrower. All the terms and conditions concerning Bajaj Finserv loans are mentioned above including loan range, repayment period, business vintage, etc. However, you also need to present 6 monthly current or OD account statements.
Here’s a list of document requirements to apply for bank loans without income proof through Bajaj Finserv:
- Identity proof such as a voter’s ID, passport, driving licence, etc.
- Duly filled application form
- Photographs (passport-sized)
- Detailed business plan
- PAN card of the company, individual, or partner(s), whichever is applicable
- Business existence proof and address proof
- Residence proof such as voter’s ID, passport, driving licence, bank statement, electricity bill, rent agreement, etc.
- Company’s Incorporation Certificate
- Partnership Deed or MoA (Memorandum of Association)
- Current account bank statement
- Shops and Establishment Certificates and rent agreement
Eligibility criteria for bank loans without income proofs
To get a bank loan without income proof for your business, here’s the eligibility criteria:
- Companies, individuals, retailers, limited liability partnerships (LLPs), manufacturers, partnerships, sole proprietorships, cooperative societies, etc., are all eligible to apply for a business loan without ITRs.
- Start-ups and new business owners are also eligible to get a start-up business loan.
- The applicant for the business loan must be at least 18 years old or at most 65 years of age (at the time of loan maturity).
- The loan amount may range anywhere between ₹10,000 to ₹50 Lakhs. It depends on the business requirements and the applicant’s creditworthiness.
- To be eligible for the loan, the applicant must have a minimum credit score of 700. A higher credit score leads to more chances of loan approval and better loan terms.
- The requisite minimum business turnover is determined by the lending institution. However, it may vary for different lenders.
Smart strategies to consider when applying for business loans without ITR
When it comes to securing business finance without ITR, there are several smart strategies to consider:
- Maintain a strong credit score: A high CIBIL score is crucial. Particularly, when you want to apply for business loans and income proof is lacking. Here, this credit score acts as a testament to your creditworthiness for lenders. Apart from this, opting for loans from NBFCs or private financial institutions, may have more flexible lending criteria compared to public sector banks. They can even improve your chances of approval.
- Opt for government loan schemes or grants: Various schemes has introduced by the Indian government that aims at supporting new business owners. These include even those who have no collateral or ITR. Some of the prominent schemes include Mudra Loan, Stand-up India, PSB Loans, and PMEGP (Prime Minister’s Employment Generation Scheme). These programs often provide more accessible loan options tailored to the needs of emerging businesses.
- Apply with a co-applicant: Including a co-applicant such as your partner, father, mother, sibling, or unmarried child who has a stable income can significantly help you apply for a loan. As. their financial credentials can provide additional assurance to lenders about your loan’s repayment, and further improves the chance of loan approval.
- Show alternative proof of income: If ITR is not available, you can show other forms of financial documentation such as bank statements, GST returns, profit and loss statements, etc. These documents can provide lenders insight into your business’s financial health and future earning potential.
Who can apply for a bank loan without income proof for business?
This type of business loan without ITR is really useful for startups, small businesses. It is also beneficial for those who have just begun and don’t have a long financial history yet. Apart from this, it’s also helpful for businesses that have good ideas and plans. However, they had no chance to make a lot of money yet.
Things to keep in mind
While it is proved that we can apply for a bank loan without income proof for business, it’s important to remember that these loans might come with higher interest rates or other conditions. So, it would be best to always consider comparing the interest rates, business vintage requirement, repayment period, max. loan amount, etc. before applying for such loans. Further, read all the terms carefully and, if required, even talk to a financial advisor before you decide to take one.