Did you know that you can take a loan against your GST returns? GST business loan is gaining popularity among small business owners to meet their capital constraints and credit gaps.
Here is all you need to know about this loan.
Meaning of GST Loan
It is an unsecured business loan you can apply for from financial institutions. It is one of the best loan schemes for SMEs in India. It is akin to any other business loan but the lenders consider GST returns for primary evaluation.
You can apply for a GST Business loan to meet both short-term and long-term liquidity requirements.
Eligibility and Documentation for GST Loan
The eligibility and documentation criteria vary from one financial institution to another. However, some common criteria are:
· The minimum operational history of one year
· Promoters age
· KYC documents of SMEs and promoters
· GST return filing documents
· Any other financial documents if necessary
If you have well-documented GST records, they create a good impression of your business and financial health. They improve your creditworthiness and chances of loan approvals.
Benefits of GST Loan
There are several reasons why you should leverage your GST documents for a loan. Here are a few.
· There is no need to provide any collateral.
· It is available for any type of small business as long as you are a GST entity.
· There is minimal documentation because GST returns are comprehensive financial documents.
· There is less waiting time due to fast disbursal.
· It is a multipurpose loan – you can use it flexibly as per your business needs.
Utilization of GST Loan
You can invest the loan against GST for various business purposes as outlined below:
1. Procure Inventory
You can use the loan amount to purchase a new inventory of raw materials or readymade finished products that you sell. This will ensure that your production or sales continue without adversely impacting your profitability.
2. Purchase Capital Assets and Technology
If you are looking to buy new equipment, machinery, furniture, commercial property, or plant to expand your business, you can take a loan on GST returns. You can also use the loan amount to upgrade to the latest technology to improve the efficiency of your existing processes, products, or services.
3. Meet Working Capital Needs
You need working capital to pay for routine expenses such as payroll, rent on premises, office supplies, housekeeping, utility bills, intellectual property licenses, etc. The GST business loan improves your cash flow for day-to-day operations expenses.
4. Recruit and Train Talent
SMEs often struggle to attract and retain top talent due to their inability to afford high salaries. Sometimes, you are also not able to afford money to train existing manpower for skills or technologies that can boost your business. The loan against GST can help you address both of these issues.
5. Do Marketing
No matter how superior your products are, you need to advertise and market them to enhance your brand visibility and competitiveness. You can utilize the loan amount from GST to establish an in-house marketing agency or outsource it.
6. Improve Your CIBIL Score
A high CIBIL rating also increases your chances of getting a higher loan quickly and at favorable terms. If you have existing debts, you can pay them off from the GST loan amount and make your CIBIL score better.
Applying for GST Loan
Online lending platforms such as Indifi offer convenient, swift, and collateral-free loans against GST to SMEs. You can avail of SME business loans such as term loans, lines of credit, invoice discounting, or merchant cash advances. You would need to show your valid GST registration certificate and GST returns.
The online application and minimal documentation process fast-track the approval to 24 hours. Indifi then transfers the loan amount to your bank account in just three days or even less.
You can get a loan against GST from Indifi for up to Rs 1 crore at affordable interest rates. There are no hidden charges. You also have the flexibility to choose the repayment terms and conditions.
Conclusion
A business loan for GST business is approved in just three days subject to proper documents. If you are a GST-based SME, you should apply for this loan and scale your business to the next level.
