GST business loan:
Small and medium enterprises make up to around 29% of the nation’s GDP, provide employment opportunities, and have proven to be a highly dynamic factor in the growth of India’s economy. However, access to practical loan options has not been easy for these budding giants. Only a few schemes have proved to be effective for them to avail loans without being in a tangled web. And the first among them, is a GST business loan.
These are business loans provided by banks, government institutions and financial companies that offer term loans from 10 Lakhs up to 1 Crore solely based on the GST returns of micro, small and medium enterprises. In this article we will touch upon the advantages, eligibility and several aspects to keep in mind if you are looking for a GST business loan.
Advantages of a GST business loan
In comparison to conventional or traditional loans, there are several benefits that make a GST loan outshine the rest. Here are the key upsides that stand out.
- Collateral-free loans
Pledging your collateral in return for a business loan is the most complex challenge that businesses face. Many businesses either have very limited assets to pledge or they may lack any form of securities at all. However, for a GST loan, all you would need is an official documentation of your GST records, and that’s it.
- Quick disbursal periods
GST business loans are known to be quick, that is, it takes little to no time in getting your loan approved. It helps you from cash constrictions, as it directly promotes a smooth flow of operations and production through very little paperwork and delays.
- Less paperwork
The requirement of the bare minimum of paperwork is another benefit that makes GST business loans stand out from the rest. Business owners do not need to submit any further types of business related records once they have submitted the GST documents and finished the KYC verification.
- Wider usage spectrum
Business owners are allowed to use a GST business loan for whatever they see fit, as long as it does not include personal or non-business related expenses. This flexibility and non-restriction is another major benefit that you can avail from a GST business loan.
How can a GST business loan help your business?
A business needs funding for various purposes, be it financial emergencies or sustainable growth goals. A GST business loan helps you counter these obstacles with ease. Here are some of the factors why you should consider a GST business loan.
- Quick cash support and working capital
Very often, businesses are met with several cash flow complications such as GST payments and delayed invoices. They are also in frequent need of working capital to smoothly manage their daily operations. A GST business loan is a practical solution to tackle such needs.
- Business expansion
A GST business loan facilitates the funding for any business expansion or growth oriented undertakings such as branch expansions, the introduction of new services, advertising, and the adoption of new infrastructure and equipment.
- Flexibility and safety
With quick and seamless fundings from GST loans, businesses can counter unforeseen budget constraints, unexpected hurdles and tight cash flows effortlessly.
- Tax obligations
Several penalties and legal issues may impact timely GST payments. Businesses can do this on time with the help of a GST loan, protecting them from unfair outcomes.
Eligibility criteria for GST business loans
Availability of a GST business is a fairly straightforward and seamless process in comparison to traditional methods, however, businesses need to meet certain basic requirements to qualify for this loan. Below are some of them.
- GST registration
A GST registration is mandatory for availing a GST business loan as it ensures that you comply with the tax laws, pay, and collect GST.
- Business registration
In order to be eligible for a GST business loan, one must have a legally registered business entity, such as a sole ownership, partnership, private limited company, or any type of legally recognised business.
- Minimum vintage and turnover
Most lenders require you to have at least a year to 3 years of operational history for the disbursement of a GST business loan. They may also set a minimum annual turnover to qualify for a GST business loan.
- A positive financial history
A positive credit history is essential to make sure that a business pays the loans back in time. Some lenders also make sure to solidify the financial stability of a company by analysing documents such as income statements, balance sheets, and cash flow statements.
The “59 Minute” government website
The '59 minute' loan scheme is a government backed GST business loan provided to MSMEs in India. Through the government website, they are able to get online business loans ranging from Rs.10 lakh to Rs.1 crore within an hour. The interest rate for this loan starts from 8% and no collateral is mandatory for these loans. The loan gets disbursed within a week after its approval and the process is automated and contact-less.
Conclusion
GST business loans are a great way to fund your emerging business that may be in dire need of immediate funding. Regardless of your goal, be it fundraising for business expansion or a need for emergency funding, a GST loan acts as the most practical option for businesses. With collateral-free term loans of up to Rs. 1 crore with interests starting from as low as 1%, a GST business loan has the potential to immensely change the tides for your thriving business.
At TapCapital, we make sure you get the funding you need to grow your business to newer heights. Reach out to our experts to craft a curated funding process with just a click.
FAQs For GST Based Business Loans:
1. Am I eligible for a GST loan?
A company should be registered under the GST Act and have a current GSTIN to be eligible for a GST business loan. Eligibility conditions may differ between sources, and there may also be requirements like a minimum turnover and vintage.
2. What are the interest rates for GST business loans?
Interest rates for GST business loans may differ based on the credit score, business profile, loan size, and tenure. It can start for as low as 1% and government schemes such as the ‘59 minute’ loan offer interest rates at around 8%.
3. What is the loan tenure for GST business loans?
Depending on the lender and the borrower's needs, the loan period for a GST business loan can range from a few months to several years, however, in most cases, the maximum tenure offered for these loans is 3 years.
4. What are the documents required for a GST business loan?
Documents such as bank statements, income tax returns, GST filings, business registration certificates, identity proofs, residence proofs, and other relevant financial statements, might come in handy based on different lenders.