How to Get a Business Loan Without Filing ITR

Many small business owners seek loans to expand their businesses, particularly self-employed individuals, microenterprises, and start-ups. However, they might not always have easily accessible income tax returns (ITR). When applying for loans, this frequently becomes a problem.

To solve this problem, lenders have created alternate routes that enable small enterprises to obtain credit without needing an ITR. Alternatively, bank statements, accounts receivable invoices, and other relevant financial documents can be submitted by borrowers as proof of income.

This blog post will discuss how to get a Business Loan without filing an ITR by using other important documents.

What is a Business Loan Without ITR?

A Business Loan without ITR is generally offered as an unsecured loan. Lenders usually assess repayment ability using bank statements, cash flows, credit history, and business vintage instead of collateral or tax returns.

While possible, loans without ITRs often carry higher interest rates than loans backed by tax filings, since lenders perceive greater risk.

Lenders consider all of the following factors in determining whether or not a borrower can repay the loan: 

• Bank account transaction history

• Consistency and stability of cash flow

• Credit score and repayment history

• Business vintage (years in operation)

By using these factors, lenders can analyse a business’s financial performance without relying solely on the business owner’s tax filings.

How to Apply for a Business Loan Without an ITR

Business Loans without ITRs are intended for borrowers who show operational stability and consistent cash flows in their business. They may lack complete tax documents.

Alternative Income Proof Accepted by Lenders

Lenders use different documentation sources to assess a borrower's stability and creditworthiness when ITRs are unavailable. The following kinds of documents are usually needed by lenders:

Bank Statements and Cash Flow Records

The borrower's bank statements are one of the most important factors in assessing a loan application. In order to analyse trends of income and expenses, lenders typically examine bank statements from the previous six to twelve months.

Consistent debit activity shows financial discipline, whereas regular bank credits may suggest stable business operations. When accessible, bank statements and cash flow data help lenders in determining the borrower's capacity to repay the loan each month.

Annual Turnover and Business Vintage

Annual turnover provides insight into the size of the business. Sales invoices, billing data, GST reports (if applicable), and other revenue documents may be used by lenders to evaluate turnover. Another important factor is business vintage, or how long the business has been in operation. Longer-running businesses are generally regarded as less risky and more stable, which can increase their chances of getting a loan.

Credit Score and Repayment Behaviour

When ITRs are unavailable, a CIBIL score is essential for loan consideration. A high credit score is a reflection of past timely payments and responsible borrowing. This helps lenders in determining the borrower's probability of making loan repayments on time. Even without tax records, a solid payback history can greatly increase the likelihood of loan approval.

Note: Detailed financial accounts and GST filings are often optional for micro or informal businesses, but KYC and bank statements are mandatory.

Documents Required to Apply for a Business Loan Without ITR

Lenders may accept substitute documents that reflect your financial situation and business operations if ITR documents are not accessible. These may consist of:

• KYC documentation for borrowers and businesses (such as PAN, Aadhaar, and identity/address proof)

• Certificates of business registration or licensing (such as Shop Act, Udyam Registration, or Trade Licence)

• Bank account statements (usually for the previous six to twelve months)

• Sales and purchase invoices or GST filings

• Financial statements, including profit and loss statements and balance sheets

• Proof of business address, such as a rent agreement, utility bill, or ownership documents

Since the eligibility criteria might change based on the borrower's profile and the lender, not all documents are required. Detailed financial accounts and GST filings are frequently optional for small or informal businesses. However, the majority of lenders need KYC documents and bank statements.

Essential Tips for Getting a Business Loan Without an ITR

Business owners without ITR can increase the likelihood of obtaining a Business Loan with the help of certain key financial indicators.

Maintain a Healthy Credit Score

A good credit history indicates your timely repayment behaviour for past loans or credit cards. Therefore, it establishes confidence for lenders that you will repay the loan efficiently. Having a good credit score improves the chances of receiving quick and easy approval for a loan, along with competitive interest rates.

Prepare Alternative Proof of Income

Maintaining accurate records of all business sales helps document the income generated by the business, enabling lenders to evaluate its performance more effectively. This can also help expedite the Business Loan approval process.

Choose the Right Lender

The Non-Banking Financial Companies (NBFCs) and certain other financial institutions generally offer greater flexibility than traditional lending banks. Comparing different lenders allows borrowers to determine the lender that offers the best loan option in terms of interest rates and terms.

When selecting a lender for a small Business Loan, borrowers should evaluate various factors. Some of them are Business Loan interest rates, loan tenure, and flexible repayment options offered by different lenders. Comparing these factors helps businesses choose a loan structure that aligns with their cash flow requirements and long-term repayment capacity.

Request a Reasonable Loan Amount

Your chances of being approved are increased if you apply for a loan amount that fits your business turnover and payback capabilities. Lenders may get concerned about risk if funding demands are overestimated.

Maintain a Consistent Bank Account History

Maintaining consistent business transactions and preventing frequent overdrafts or bounced checks might have a favourable effect on a lender's evaluation. Consistent cash flow and sound financial management are indicated by a stable banking pattern.

To Conclude

Business loans without ITRs offer essential financial assistance to small businesses without formal tax documentation. Instead of using only tax documents as evidence, lenders look at alternative proofs to assess the true performance of a borrower’s business. Therefore, it is important to demonstrate your business's financial stability through alternative documents and maintain an excellent credit score.

Looking for a hassle-free loan? Poonawalla Fincorp offers a Business Loan of up to ₹75 Lakh with minimal documentation. Connect with us today for more details!

Read Also: Top 6 Mistakes To Avoid While Taking A Business Loan

FAQs

Is it possible to obtain a Business Loan without filing an income tax return?

Yes, some lenders provide Business Loans based on bank statements and cash flow rather than the ITR.

What proof of income can I provide if I don't have an income tax return?

Bank statements, cash flow statements, and turnover statements are examples of acceptable types of proof.

Are secured Business Loans provided without requiring an ITR?

Yes, some lenders may offer secured Business Loans without requiring ITRs if strong collateral is provided. However, this depends on the lender’s policies and documentation norms.

Does a borrower's credit score play a role in loan approval?

Yes, the better the borrower’s credit score, the higher the likelihood of loan approval and the lower the interest rate offered.

What can a Business Loan without an ITR be used for?

The funds from a Business Loan without an ITR can be used for working capital, inventory, business expansion, and other operational expenses.