5 Must-Have Financial Documents To Get A Business Loan Easily

Applying for a business loan?

Looking to grow your business but do not have the savings to get up and running. This is where business loans come in. But like most good things, business loans don’t come easily.

Getting a small-business loan isn’t a piece of cake! Especially for small businesses, the lending standards of banks are really tight. Well, although getting approved for business loans is difficult, the more prepared you are, the better. 

Having the right business documents in hand increases your chances of getting the loan by 50%! 

This is because your loan eligibility is calculated based on your ability to pay it back. Each bank has specific requirements, criteria and eligibility factors to decide if you’re eligible enough.

However, the loan process becomes seamless if your financials, accounting and tax records are up-to-date, accurate and remain organized. i.e Getting a business loan from a bank becomes easier when you have proper financial documents of your business.

Here’s what documents prepare you to get a business loan sooner:

Business Transactions Records

✔ Every moneylender/bank will verify your financial status before approving the business loan.

✔ They expect you to submit your business transaction records preferably audited or reviewed.

✔ It is for this reason, it is advised to maintain account-by-account information with sales details and payment history. 

However, a lot of business owners ignore maintaining books as they get too busy with other tasks. Good accounting software will help the business owner to access any information about business sales/payments/customers with accuracy without manual effort.

 


Cash Flow Statement

✔ The bank will also look at the summary of your outstanding receivables and payables as it is an absolutely necessity. 

✔ It gives your bank/lenders a better insight into your business’s financial status and shows your ability to repay a loan.

✔ A healthy cash flow report puts your business at a lower risk of fraud. It is for this reason, transparency into the financial state of your business is an absolute must!

Make sure you have gathered Cash flow statement before applying for a loan. Again, good accounting software like Vyapar App helps you generate cashflow reports without doing any manual background work. 

 

Profit and Loss Statement

✔ A Profit &Loss statement shows how your profits have been over a period of time.

✔ Your bank might need this to examine your business’s net income or earnings. 

✔  If you’re consistently profitable, then you’re more likely to be considered financially well prepared and equipped to repay the loan taken. Hence, you may have to supply as much profit and loss history as you have.

Need to trace your profits and losses? Try Vyapar App to maintain your business accounts, get to know profits for the day/month/year effortlessly.


Balance Sheet

✔ Your balance sheet allows people outside of your company to quickly understand its financial condition.

✔  Additionally, banks may use it to understand where their loan amount will go and when they can expect to be repaid. It determines the Risk and Returns involved.

 When applying for a loan, the bank will review your balance sheet to see how easily you can manage your financial burden in the short-term.

✔ Not just for the bank, this document helps you know your financial standing and lets you make informed decisions. In addition, it improves your business’s operational efficiency, borrowing habits, and overall financial health.  

✔ It can also tell you how long it takes to sell inventory and the length of your accounts receivable. This can help you identify customer buying trends and see how your company’s finances and operations compare to competitors.

GSTR Returns

✔ Last but not least, the bank will ask to see your business tax returns from the previous year. This is to cross-verify tax return details with the information you’ve supplied through your other financial documents. 

 

Banks will always want these financial documents to judge whether you have the ability to repay the loan or not. Together, these 5 business-financial documents give lenders a perfect picture of your business’s financial health and see if you’re trustworthy to receive the loan. 

If you have not been keeping these records right, it is time to start since they could be of help in the future when applying for a loan. 

Hence it is very important to use accounting software for all your bookkeeping needs from day 1 of your business. 

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