Eligibility and Documents for a Commercial Loan

Eligibility and Documents for a Commercial Loan

A commercial loan is a common form of borrowing in the country. The loan is usually short term finance that is offered to businesses to meet their operation costs and capital expenditures. A business goes through various stages where it needs funds to grow and expand. This is when it is time to apply for a loan. A progressing business has many expenses and a loan will be an ideal source to support the business and to take it to its potential.

Usage of the loan

Commercial loans have transformed with time and they not only fulfill the short term financial needs of the business but also help meet the long term goals. Whether it is to meet the day to day expenses of the business or to invest heavily in business technology, the loan will help meet every type of business need. It is important to remember that the loan should be repaid within the flexible tenure. It is an unsecured form of financing which is offered with a flexible repayment op-tion and a low rate of interest.

Eligibility for the loan

You can be a partnership firm, a private limited company, a proprietorship, and a public limited company to apply for the loan. The loan application process is simple and hassle-free. Once you identify the purpose of borrowing and decide how you intend to use the funds, you can apply for the loan. Different lenders may have varying eligibility criteria with regard to the turnover and profit of the business. You can compare the same online and then make the application. It is important to have the business in existence for at least a period of five years and it should be a profitable business.

When you are ready to make an application, you simply need to fill the application form and submit documents as listed below:

• PAN of the directors and the company,
• Annual statements including the income statement, balance sheet, and cash flow statement,
• GST returns, if applicable,
• Bank statements for the last six months,
• Proof of going concern of the business,
• ITR of the directors and the company,
• Copy of registration papers of the company,
• Articles of Association and Memorandum of Association.
• Projected income statement and balance sheet of the company.

You need to have adequate cash flow to make the loan repayment on time and the lender will look into it before approving the application. Strong cash flow shows that you will not default in the repayment. The firm should be making profits and is expected to make profits in the specified time frame. If you have a good credit score, the loan application will be approved in no time and you will get access to funds.

Prepare a repayment schedule to ensure timely repayment of the commercial loan. The EMI calculator is an ideal tool to help you with the same. The calculator is available for free and is simple to use. You only need to provide the loan amount and tenure to get a quick estimate. Consider the monthly inflows and outflows of the business before you agree on an EMI amount. Timely payment of dues will make it easier for you to get access to loans in the future as it has a direct impact on the credit score. The loan will help take your business to new heights and will turn your aspirations into reality. Do not rush through the borrowing decision. Take your time and compare the interest rate offered by different lenders before you sign on the dotted line. Understand the terms and conditions of the loan thoroughly before you accept the loan.

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