Before you submit a request for getting loan through the bank, make sure that you understand all the papers that you would need for getting your loan claim approved. You are required to submit a number of documents so that the bank can examine your finances and business. For now, let us take a comprehensive look at the documents you will need to get a loan and their importance.
Which Papers are Needed to Obtain a Loan from a Bank?
You are going to a bank to apply for a loan so you will have to show a certain set of papers. You have to prepare the following documents:
- Corporate Papers
- Personal Papers
- CMA Data Documents
Let’s get detailed on each of them.
Primary Documents You Need to Submit
Complete the Loan Application and Send them Doctrin
Completing an application form opened the files when making application for loan. This form has some specific fields which include but are not limited to the following:
- Your Full Name
- Business Trade/Franchise Name
- Company Name
- Home Address
On top of this form, you are also required to submit multiple personal documents which correlate to your verified identity as well as your current residential address.
Submission of Personal Documents
Here are some of the more important personal files that you are obligated to include.
- Aadhaar card
- PAN Card
- Passport
- Voter ID
- Driving License
- Electricity Bill
- Business Grant License
- Primary Lease Documents
Also, for reliable proof of income, it might be necessary to provide some bank statements.
Settle the Processing Fee Payment
Banks normally collect a processing fee, which is within the range of 0.5% and 2.5%. If the processing fee is higher than the average loan balance, it is usually reduced. Larger loans tend to come with lower fees, while smaller loans incur higher fees.
Documents Pertaining to the Company Needed
As for personal documents, you are required to submit a few specific company related documents as well. These include:
- Last 3 years of Tax Returns
- E-filing info
- Last 3 year balance sheets
- P&L Statements
- Cash Flow Statements
- Projected Performance on a company’s letterhead
- Risk Management Policies
- Latest GST compliance documents
Directors and other key management personnel details
If your company has a private limited structure, you are also required to submit:
Directors and Shareholders details
For partnership firms, a partnership deed is to be submitted as well.
What Exactly Is CMA Data and Why Is It Relevant?
Having accurate CMA (Credit Monitoring Arrangement) data is extremely essential when applying for a business loan. It gives insight into the forecast and performance of the business. Some of the data that is included are the following:
- Revenue estimates for the present and future years
- Expense estimates
- Investment expenditure for the business
- Plans for loan interest payment
- Debt retirement strategies
Banks rely on this data to evaluate the value of the loan, security and the interest rate. Without sufficient CMA data preparing a loan especially on larger projects will be rather difficult.
Important Features of the CMA Data
The report should include the following components in order to come with a credible report.
Existing and Anticipated Credit Facilities
Operating Statement: This reveals the sales, expenditures, tax responsibilities, and payment for a loan.
Balance Sheet Analysis: Important measures such as debt to equity ratios, assets and liabilities need to be examined and emphasized.
Current vs. Noncurrent Assets: This comparison also tests the overall financial health of the organization. An example is if the liabilities stand to be Rs 100 and assets are at Rs 150, then it means you can meet your liabilities.
Moreover, banks focus on, Watching Over the Banking Tasks: Cash flow statement Fund flow analysis Important ratios like debt equity ratio and current ratio Building Trust with the Bank Balance Everything is Critical. Providing all required documents, including KYC, directors, and shareholders, helps to build trust with the bank. Even in cases when you do not provide some specific information, the bank has the ability to obtain some of the data from public records. Nevertheless, it is very important to give all these details to gain approval as it will trust your business because of such a complete submission of information. Key Takeaways Complete All Documents Needed: Get all personal and company documents ready before applying for a loan. Know the CMA: Carefully constructed CMA data is key to getting a loan particularly for business and project loans transparent Inform the bank fully so as to earn their trust. Following these steps will increase the chances of getting a loan for the company or personal use. Make sure the documents are properly arranged, filed in time and accurate to ease the approval work.
