Income tax returns (ITR) is one of the most essential documents needed to secure a business loan in India. However, new MSMEs and start-ups face challenges in submitting ITRs in the initial stage of their business operations. If you are a new business owner seeking funding to grow your venture and ensure smooth operations, you can still avail business loans without filing ITR.  This article offers a comprehensive guide on the entire process.

Steps to Obtaining a Business Loan Without ITR in India

Start-ups, MSMEs, self-employed individuals, Traders, retailers, manufacturers, LLPs, and sole partnership firms, and budding entrepreneurs starting a new business qualify for business loans with ITR. The following guide sums up how you can apply for a business loan in India with ITR: 

Apply with a High Credit Score

If you wish to secure a business loan without ITR, maintaining a good credit score is key. A solid credit score above 750, along with a good payment history and low credit utilisation assures the lender of your creditworthiness. Moreover, it also qualifies you for lower business loan interest rates. 

Select the Right Lender

Conduct thorough research to find lenders that offer business loans without ITR. In recent years, the Indian government has launched several schemes like Stand-Up India, PSB loans, and Mudra loans to offer financial support to MSMEs, start-ups, and new businesses. Eligible businesses can access capital without pledging collateral or submitting ITR. Remember to compare business loan interest rates and terms as well before selecting a lender.

Read Also: Financing Your Dream: A Comprehensive Guide to Business Loans for Startups

Prepare and Submit Necessary Financial Statements

For any business loan application, you need to submit a host of financial documents to the lender. In the absence of ITR, these ancillary documents become even more important. Lenders use documents like your bank statements from the last 6-12 months, profit and loss statements, and balance sheets to evaluate your business cash flows. Submitting comprehensive financial documents provides the lender with a comprehensive overview of the company’s financial standing, cash flow, revenue streams, and profitability to prove your eligibility for the loan.

Complete the Loan Application 

Once you have all the necessary documents in order, you can complete the application form and submit the same for evaluation. 

Tips to Boost Your Chances of Securing a Business Loan Without ITR

Let’s review a few handy tips to boost your chances of securing a business loan in India without ITR submission:

• Apply for the business loan with a co-applicant who is a professional with a valid proof of income. 

• Offer valuable assets like property, inventory, or equipment as collateral to the lender. Pledging valuable assets as collateral reduces the lender’s risk, while also helping you qualify for lower business loan interest rates.  

• Consider non-traditional lenders like peer-to-peer lending platforms and microfinance institutions that may have more flexible requirements that do not require ITR submissions.

• Apply for industry-specific loans that are designed to meet the unique needs of your sector and generally may waive-off the ITR requirement. These loans generally have varied eligibility criteria, where ITR may be given less weightage in the entire evaluation process. 

• Alternatively, you can consider a personal loan as well. But doing so may increase the cost of borrowing since business loan interest rates are relatively lower. 

Conclusion 

As a new start-up entrepreneur or MSME owner, you can secure a business loan in India without ITR by following the guide outlined above. But since different government schemes and institutions have varying terms, it’s best to conduct thorough research before submitting your application. You should also remember that applying with a good CIBIL score, co-application, and pledging collateral can significantly boost your chances of securing approvals.