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Yes, you heard it right! Your startup can get a business loan with ITR i.e. income tax returns.
Often business owners especially budding entrepreneurs do not qualify for a business loan due to the lack of necessary documentation. If you are looking for a loan, however, you do not have ITR which is a necessary document, here is what you can do.
Business loan without ITR in India
While we speak about the business loan without ITR, one must understand that many public and private banks may not offer a loan without such essential documents. However, NBFCs i.e. non-banking financial companies are known for their relaxed eligibility criteria and list of required documents. Here is a list of a few banks and NBFCs, which offer a business loan without ITR.
|Bank/NBFC name||Loan amount||Interest rate|
|Bajaj Finserv||Up to ₹50 lakh||12%|
|Tata Capital||Up to ₹25 lakh||12-20%|
|LendingKart||Up to ₹10 lakh||1.5% to 2% per month|
|IDFC Bank||Up to ₹10 lakh||19-22%|
Note: The business loan interest rates and other details are subject to change from time to time. It is best to get information from the bank/NBFC about the prevailing rate of interest.
Business loan without ITR: How to apply online?
Here are the guidelines to apply for a business loan online.
Step 1: Firstly, you need to research well on the banks and NBFCs that offer a business loan without ITR. Learn about their rate of interest and eligibility criteria before applying.
Step 2: You can visit the respective bank’s and NBFC’s websites to gather information.
Step 3: Check if you meet the eligibility criteria.
Step 4: Check the list of documents required for applying.
Step 5: Fill in the application form to apply.
Documents required for a business without ITR
Here is a list of documents required for a business loan without ITR.
- Duly filled application form
- Passport size photos
- Identity proof documents such as Aadhaar card/passport/driving license
- Proof of residence like passport/voter ID/house agreement, etc.
- PAN card
- Bank statements for 6-12 months
Note: The list of required documents varies as per the bank/NBFC. It is best to get an exhaustive list of documents from the respective bank/NBFC.
Eligibility criteria for a business loan without ITR
Although eligibility criteria for a business loan change from bank to bank, here are some of the commonly required criteria.
- The following types of businesses are usually eligible for a business loan without ITR: Startups, Limited Liability Partnerships (LLPs), Partnership firms, self-employed individuals, traders, and so on.
- The age criterion is usually 22 to 65 years.
- A credit score is one of the crucial factors for obtaining a business loan without ITR. A CIBIL score of more than 700 is considered to be a good score for a loan application. However, in some cases, financial institutes may require higher CIBIL scores.
Tips for getting a business loan without ITR
Here are some tips for you to get quick approval for a business loan without ITR.
Maintain higher credit score:
In the absence of an ITR document, financial institutes rely heavily on CIBIL score and CIBIL report to determine your creditworthiness. Therefore, it is necessary to maintain a higher credit score if you are seeking a loan without ITR.
Have a robust credit history
Pay your taxes such as GST and other payables on time. This will help you to build a credit history and speed up your loan processing.
Apply with collateral
Involvement of collateral helps a lot. Since financial institutes can liquidate your assets in case of non-payment, collaterals can help you to get a business loan without ITR quickly.
Disadvantages of a business loan without ITR
Although a business loan without ITR can help you raise funds for your startup, you should understand that there are a few disadvantages associated with it.
- Higher rate of interest: The rate of interest of a business loan without ITR is usually higher as compared to the loan you can seek with the submission of a full set of documents.
- Short tenure: A business loan without ITR is usually approved for short tenure. Higher interest rate and shorter loan tenure results in higher EMIs.
- Need for a high CIBIL score: Income tax returns verify your income, which denotes your loan-repaying capability. However, in the absence of this document, your creditworthiness is scrutinised and your credit score and credit report gain importance. Hence, banks and NBFCs need higher CIBIL scores to approve a business loan without ITR.
Alternative options to a loan without ITR
So, if you do not have an ITR, opting for a business loan without an ITR is not the only option for your startup. There are a few other options that you should know:
Applying with co-applicant:
If you have a business partner or a family member who can co-apply with you, it would help you to get a business loan with a lower rate of interest. This will help you to lower your EMI and reduce your financial burden.
You can also take advantage of a loan that your bank may have pre-approved for you or your business. Pre-approved loans can be obtained without much documentation. Hence, they turn out to be the right choice in the absence of certain documents. Moreover, they help you to improve your CIBIL score too.
Personal loan for business
You can also seek a personal for your business needs. Personal loan for a business is taken under the name of the business owner instead of the business. Therefore, individual credit score is taken into account.
The government of India has launched several schemes to help startups and MSMEs grow. Most of these schemes do not require ITR as proof of income. Here are a few schemes which can help you to raise funds for your startup.
In conclusion, a business loan without ITR is a feasible option to raise funds for your startup. However, there are a few disadvantages associated with it. Therefore, it is necessary to think from all perspectives before applying.