How to Get a Loan Against GST Returns: Process, Application, Benefits, and Interest Rates
Blog post descriptioGetting a loan against GST returns is an excellent way for small businesses to secure funding based on their tax records. This type of loan, often offered without collateral, leverages the GST returns filed by a business to assess its creditworthiness. Here’s a detailed guide on the process, application, benefits, interest rates, and security requirements.
BUSINESS GUID
Nikhil Potode
7/2/20242 min read
Getting a loan against GST returns is an excellent way for small businesses to secure funding based on their tax records. This type of loan, often offered without collateral, leverages the GST returns filed by a business to assess its creditworthiness. Here’s a detailed guide on the process, application, benefits, interest rates, and security requirements.
Process and Application
Eligibility Check: Ensure your business is eligible for a GST-based loan. Typically, this includes having a GST registration and a minimum business vintage of 2-3 years.
Documentation: Gather necessary documents such as:
GST registration certificate
Latest GST return invoices
Business continuity proof (e.g., incorporation certificate, trade license)
KYC documents (e.g., PAN card, Aadhaar card)
Financial statements for the last two years if the loan amount exceeds a certain threshold (usually Rs. 20 lakhs).
Application: Fill out the loan application form available on the lender’s website or at their branch. Submit the form along with the required documents.
Credit Evaluation: The lender evaluates your creditworthiness based on your GST returns and financial health. This may include checking your credit score and business revenue.
Approval and Disbursal: Once approved, the loan amount is disbursed to your account. This process can take as little as 48 hours with some lenders.
Benefits
Quick Disbursal: Loans based on GST returns are processed quickly, often within a few days, providing timely funds for business needs (Flexiloans) (HeroFincorp).
Collateral-Free: Many GST-based loans are unsecured, meaning you don’t need to pledge any assets (Flexiloans) (HeroFincorp).
Multiple Uses: Funds can be used for various business purposes, including working capital, inventory purchase, expansion, and equipment upgrades (HeroFincorp).
Ease of Application: The documentation process is relatively straightforward, especially for those who regularly file their GST returns on time (HeroFincorp).
Interest Rates and Terms
Interest rates for GST-based loans vary by lender and are influenced by factors such as loan amount, tenure, and the borrower’s credit profile. Rates can start as low as 1% per month (Flexiloans). Loan tenures typically range from 12 to 36 months, with amounts varying from Rs. 3 lakhs to Rs. 20 lakhs or more, depending on the lender (Axis Bank) (Bank of Maharashtra).
Security Requirements
Most GST-based loans are unsecured, requiring no collateral. This makes them accessible to small and medium-sized businesses without significant assets to pledge. However, for larger loan amounts, lenders might request additional financial documents and proof of business continuity (Flexiloans) (Bank of Maharashtra).
Where to Apply
Here are some lenders offering loans against GST returns:
Axis Bank offers unsecured business loans based on GST returns with minimal documentation and quick disbursal (Axis Bank).
FlexiLoans provides collateral-free business loans with flexible terms and fast processing based on GST returns (Flexiloans).
Bank of Maharashtra offers various loan schemes, including those based on GST returns, with competitive interest rates (Bank of Maharashtra).
Hero FinCorp details the benefits of GST business loans and provides easy application processes online (HeroFincorp).