What a bank looks at before a loan
Walk into a bank with the documents and answers a loan officer is looking for.
5 min read
A loan officer has one question: will this money come back? Everything they ask for is a way of answering it. If you know what they are looking for, you can have it ready — and a prepared borrower is one a bank finds easy to say yes to.
What they want to see
That the business is real. Registrations that match what you do — Udyam at the least, and GST or a food or shop licence where your activity needs one. A bank account in the business's name.
That money already moves through it. Bank statements, usually for the last six months to a year. This is the single most persuasive document you have, which is why money that goes through your personal account or in cash is money the bank cannot count.
That you pay what you owe. Your credit score and history. A missed EMI on a phone or a credit card shows up here. Check your own report before you apply — you are entitled to see it, and you can correct mistakes in it.
That you have thought it through. For a new business or a larger loan, a short project report: what you will spend the money on, what you expect to sell, and how the repayments will be met from that. It does not need to be long. It needs to add up.
That you have something in it yourself. Most loans expect the owner to bring part of the money — the "margin". A founder who has put in their own savings is a founder who will work to protect them.
The documents to keep ready
- PAN and Aadhaar of the owner (and of each partner or director)
- Business registrations: Udyam, and GST or licences where you have them
- Business bank statements
- Income tax returns, if you have filed them — usually the last two or three years
- A quotation for any equipment or machinery you are buying with the loan
- The project report, for a new business
Ask the bank for its list before you go. Branches differ, and walking in with exactly what they asked for saves weeks.
Collateral, and what to do without it
Banks traditionally want security — property, gold, a fixed deposit — that they can sell if the loan goes bad. Many first-time owners have none.
That is exactly the gap two of the schemes in the next lesson exist to fill. MUDRA loans are collateral-free, and a bank can cover a small-business loan with a CGTMSE guarantee instead of asking you for property.
Be wary of agents who promise a loan "guaranteed" for a fee. You apply to a bank directly, and the government schemes do not need a middleman.
Before you apply
Run the scheme check below. It tells you, from the schemes' own rules, which of the four big schemes are open to you at the amount you need — so you walk in asking for the right loan by name.