Are you an MSME business owner looking to expand your business operations or planning to expand current business? If yes, you may already have sufficient capital to scale up, if not you are in need of financing for your business. However getting a business loan is not very easy and has a lot of formalities and paperwork included unless you are looking to get a loan from an NBFC lender. In the Indian business landscape, securing a loan can be a crucial step towards growth and expansion. Goods and Services Tax also known as GST was introduced in India in 2017 and this changed the way Business Loans were allowed to loan seekers as GST has become one of the essential components for business loans. Having a GST certificate adds an advantage for you as a business owner to get a loan disbursed. By 2024 GST has become one of the key requirements for lenders to even consider a business loan request.
Features of GST Business Loans
GST based business loans are given by traditional banks and lending institutions along with fintechs and NBFCs
- Simplified Documentation: One of the best parts of GST based business loans is the reduced paperwork involved. Paperworks creates a lot of delay and uncertainty and makes it difficult for the lender and loan beneficiary. Unlike traditional business loans that need a lot of financial documents, GST business loans primarily look into a business’s GST filing history. This process helps primarily in avoiding the need of extensive paperwork and cross verifications.
- Credit Score Independence: have a lower credit score and you are being rejected by banks and other institutions? If you have a GST registration done it wouldn’t be difficult anymore to get Business loans.
- Faster Approval: The streamlined documentation process and focus on GST data lead to quicker loan approvals. This is particularly beneficial for businesses requiring immediate access to capital for operational needs or growth opportunities.
- Collateral-Free: Another feature of the GST-based MSME Loan is that they are unsecured and don’t need the loan seeker to submit collateral against the loan amount. This makes it easy for the common man also to apply for loans and get benefited and thereby in scaling their business.
- Flexible Use of Funds: The MSME business loan amount received through a GST business loan can be used for various business purposes, such as purchasing inventory, managing working capital, or expanding operations. This flexibility allows businesses to address their specific financial needs.
Impact of GST on Business Loan Landscape
The introduction of GST has significantly impacted the business loan landscape in India. Here’s how:
- Improved Transparency: GST filings provide lenders with a transparent view of a business’s financial health. This transparency gives more credibility to the business and more confidence to the lender as they have a valid and reliable source for information.
- Enhanced Creditworthiness Assessment: GST data offers a more accurate and real-time picture of a company’s financial performance compared to traditional financial documents. This empowers lenders to assess a business’s true creditworthiness and growth potential.
- Increased Access to Credit: With simplified documentation and a focus on GST data, GST business loans have opened doors for smaller businesses and startups that might not have qualified for traditional loans due to limited credit history or lack of collateral. This promotes financial inclusion and fosters the growth of new ventures.
- Reduced Processing Time: The streamlined documentation process associated with GST business loan leads to faster loan approvals. This allows businesses to access much-needed capital quicker, enabling them to seize time-sensitive opportunities.
Conclusion
In conclusion, the arrival of GST has become a lot beneficial for small business owners seeking financial assistance. GST based business loans, with the much simplified processes, credit score independence, and faster approvals, is a much much better option for small business owners. Out of all the lenders out there NBFCs are the best option for MSME owners as NBFCs are traditionally MSME friendly. By providing lenders with a transparent view of a business’s financial health, GST empowers them to make informed decisions and promotes responsible lending practices. Overall, Goods and services tax certificates have turned out to be in benefit for MSME owners and help them secure a loan faster than before.
