Business Loan Applications: Required Bank Statements

Business Loan Applications: Required Bank Statements

Why Banks Want to See Your Papers?

When you ask for a business loan, banks must check if you can repay it. They review your papers, which detail your financial situation and business. Let’s learn about the important papers you need to get a loan.

The Big Six: Papers You Must Have

1. Your Business Plan

A business plan is like a map for your company. It shows where you want to go and how you’ll get there. Your plan should say:

What your business does
What you sell
Who will buy from you
How you’ll beat other businesses
How will you tell people about your stuff
How much money do you think you’ll make
Who’s in charge of what

Banks like to see a good plan. It shows them you know what you’re doing. Be sure to explain how you plan to use the loan money and how you intend to repay it.

2. Money Papers

Banks want to see how your business manages its finances. They ask for two kinds of papers:

Financial statements: These show whether your business is generating a profit. You need:
- A balance sheet
- An income statement
- A cash flow statement
Bank statements show how money moves in and out of your account. You usually need to show the last six months.

These papers help banks determine whether you’re financially responsible and can repay the loan.

3. Tax Returns

Your tax returns show how much money your business made and how much tax you paid. Banks usually want to see your tax returns for the last three years. This helps them see if your business grows and makes money over time.

4. Business Registration Papers

These papers demonstrate that your business is legitimate and compliant with the relevant regulations. You might need:

A paper that says your business exists
A paper that says what your business does
A paper that shows you can collect taxes
A paper that says you can run your business in your town
A paper that shows you’re a small business

5. Stuff You Own

Sometimes, banks want you to promise something valuable if you can’t repay the loan. This could be:

A building
Machines
Things you sell
The money people owe you

If you have something like this, you need papers to prove you own it. This makes banks feel more secure about lending you money.

6. Who Are You?

Banks need to verify your identity. They ask for papers that prove your identity. You might need to show:

Your ID card
Your tax card
Your voter card
Your passport
Your driver’s license

Usually, you only need to show two of these. However, please verify with the bank to confirm.

Getting Ready to Ask for a Loan

Here are some tips to help you get ready:

Make a list of all the papers you need.
Check off each paper as you prepare it.
Ensure your financial documents are up to date.
Ask someone knowledgeable about business to review your plan.
Ensure your ownership papers are accurate.
Keep copies of everything for yourself.

Why These Papers Matter?

Having all these papers ready shows banks you’re serious. It helps them decide more quickly whether they can lend you a loan. Without these papers, banks might say no to your loan.

What Else Helps You Get a Loan?

Besides having the proper papers, here are some things that make banks more likely to say yes:

A good credit score shows you’ve been good at paying back money.
Owning valuable assets: This makes banks feel more secure about lending to you.
Steady income: This indicates that you can likely repay the loan.

Looking at Your Bank Papers

Banks scrutinize your bank statements closely. Here’s what they check:

How Much Money Do You Have

They want to verify that you have sufficient funds to make loan payments. They also consider how much you save each month, which helps them determine whether you’re financially responsible.

If You Ever Run Out of Money

Sometimes, people take out more money than they have. This isn’t good. It makes banks worry that you might be unable to repay a loan.

Where Your Money Comes From

Banks want to know that your money comes from reputable sources. They check to make sure it’s not from anything illegal.

What do You Spend Money On?

They look at what you buy and pay for. This helps them see if you have other loans or credit card bills that you haven’t disclosed.

Why do Bank Statements Matter So Much?

Your bank statements tell a story about how you handle money. They show:

If you make enough money to pay back a loan
If you’re good at saving money
If you pay your bills on time
If you have other loans you’re paying off

Banks use this info to decide if they can trust you with their money.

What Happens If Your Papers Look Bad?

If your bank statements show problems, banks might not want to give you a loan. They might think you’re not good with money. This could mean:

You don’t have enough money saved
You often run out of money in your account
You have big bills you’re struggling to pay
Your income isn’t steady

If banks notice these things, they might decline your loan.

Getting Your Loan Faster:

To make getting a loan easier:

Know what papers the bank needs before you ask for a loan
Have all your papers ready when you apply
Make sure your papers are correct and up to date
Choose a good bank or money company to ask for a loan

Some companies, such as IIFL Finance and Shriram Finance, strive to make the loan application process more manageable. They don’t ask for too many papers, and you can even apply for a loan online with them.

Wrapping Up:

Getting a business loan can help your company grow, but you must be ready. Having the proper papers is super important. It shows banks that you’re serious and trustworthy.

Remember, banks look closely at your money habits to ensure you can repay the loan. If you’re good with money and have your papers ready, you’re more likely to get the loan you need.

So, get your papers in order, demonstrate financial responsibility, and choose an excellent company to apply for a loan. This will give you the best chance of getting the money your business needs to grow and succeed.