Starting a new business or a startup can be an exciting endeavour, but it can also be challenging, especially when it comes to financing. One of the main obstacles new businesses face is the requirement of Income Tax Returns (ITR) to avail of a business loan. However, not having an ITR does not mean that startups and new businesses cannot avail of business loans. In this article, we will explore some alternative options available for startups and new businesses to get a business loan without an ITR.
Collateral-based loans are an excellent option for startups and new businesses that do not have an ITR. Collateral is any asset, tangible or intangible, that can be pledged as security against the loan. Collateral-based loans are relatively easier to get, as they offer security to the lender against the loan. The lender can sell the collateral in case of non-payment of the loan.
Bank Statement-Based Loans
Startups and new businesses can also avail of bank statement-based loans. These loans are sanctioned based on the creditworthiness of the business, which is determined by analysing the bank statements of the business. The lender checks the transactions, deposits, and withdrawals in the bank account to determine the repayment capacity of the borrower. Bank statement-based loans are easier to get than ITR-based loans, as they provide a clear picture of the financial standing of the business.
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Invoice financing is another option available to startups and new businesses to get a business loan without an ITR. Invoice financing is a type of loan where the lender advances money against the unpaid invoices of the business. The lender can provide up to 80% of the invoice value as a loan. The borrower can repay the loan when the customer pays the invoice.
Non-Banking Financial Companies (NBFCs) are financial institutions that offer various financial products and services, including business loans, to startups and new businesses without an ITR. NBFCs offer loans based on the cash flow and financial standing of the business, rather than the ITR. NBFCs have lenient eligibility criteria and offer quick loan disbursal, making them a popular choice for startups and new businesses.
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The Government of India has introduced various schemes and programs to support startups and new businesses. One such scheme is the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), which provides collateral-free credit to startups and new businesses. Under this scheme, the government guarantees up to 75% of the loan amount, making it easier for lenders to provide loans to startups and new businesses.
Business Loan Eligibility without ITR
Entities that are eligible for business loans without submitting Income Tax Returns (ITR) include start-up enterprises, first-time business owners, and self-employed professionals.
The eligibility criteria for such loans are that the applicant must be at least 18 years old at the time of loan application and not more than 65 years old at the time of loan maturity.
The applicant’s credit score must be above 750, with a score closer to 900 considered good. A co-applicant is optional as per the applicant’s preference. The annual turnover requirement is defined by the lender and varies from bank to bank.
Collateral is not required for loans up to Rs. 2 crores, except for equipment finance, bill discounting, letter of credit, etc.
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To sum up, startups and new businesses can avail of business loans without an ITR by exploring alternative options available to them, such as collateral-based loans, bank statement-based loans, invoice financing, NBFCs, and government schemes. It is essential to evaluate the eligibility criteria, interest rates, and repayment terms of various lenders before choosing a suitable option. With the right approach and preparation, startups and new businesses can get the financing they need to grow and thrive.