Every entrepreneur has a vision for exponential growth in their businesses. To invest in growth, the majority of them seek business loans. While there are various providers in the market who provide business loans, every financial institution and lender checks your financial background before issuing a loan.
One of the most vital yet often neglected factors is GST (Goods and Service Tax) track records. These not only demonstrate your business’s financial stability but also significantly improve your chance of securing the best business loan.
Why Do Lenders Check GST Records?
When lenders evaluate your business loan application, they imply their focus on knowing the business’s creditworthiness and stability. Your GST track records allow them to have a clear vision of your business’s revenue streams and tax compliance.
Here are some reasons why lenders prefer to check GST records:
- Validation of Revenue: The lenders get accurate knowledge about your business’s turnover with GST turnovers. They can match it to your bank statements at the time of cross-examination.
- Insight of Cash Flow: To assess risk more effectively, they can analyze your cash flow trends from GST records.
- Compliance Indicator: It’s easy for lenders to trust businesses that are compliant with regulations. Timely GST filling increases your chances of securing a business loan.
Strong GST records show how financially disciplined and stable your business is.
Tips to Strengthen Your GST Records for Business Loan Eligibility
To enhance your business loan eligibility through GST records, it’s essential to keep these things in mind:
1. Ensure Accurate GST Filing
The fundamental to building trust is filing accurate GST returns. Inaccuracies or discrepancies in your GST returns can lead to complications during your business loan approval process.
2. On-Time Filing of GST Returns
If you miss or delay your GST filings, the lender may not prioritize your business loan application. They may assume the delay as a sign of possible financial issues. So it is good to set up reminders for it. You can download the monthly GST calendar here.
3. Utilize Input Tax Credit (ITC)
Highlighting the ITC usage in your GST returns shows your lenders your effective cost-control strategies. It also reduces your tax burden and reflects your sound financial management ability.
4. Work with a GST Consultant
Hire a GST consultant for error-free filings, better tax planning, and timely submissions, all of which enhance your business loan eligibility.
Benefits of Strong GST Records for Business Loan Approval
Keeping strong GST records can provide several advantages when applying for a business loan:
Higher Loan Amounts:
Lenders seamlessly approve higher business loan amounts if you have transparent GST records.
Quick Loan Processing:
Maintaining clear and accurate GST records can speed up your loan approval process, as it makes the verification process less time-consuming for lenders.
Competitive Interest Rates:
Businesses with well-maintained GST compliance often qualify for business loans with lower interest rates as lenders see them as lower-risk borrowers.
Improved Creditworthiness:
Regular and accurate GST filings contribute positively to your business’s overall credit profile.
How GST Records Influence Different Types of Business Loans
Strong GST compliance shows a great impact on the approval of various types of business loans:
Working Capital Loans:
Banks often rely on GST turnover to determine the amount of working capital loans, ensuring that financing aligns with your business’s cash flow needs.
Term Loans:
When businesses seek funds for long-term investments, lenders focus on analyzing the GST returns to confirm consistent revenue generation for repayment.
Overdraft Facilities:
A strong GST record can improve your eligibility for overdraft facilities, allowing you to handle unforeseen expenses effectively.
Common Mistakes to Avoid
While you use GST records for loan approval, avoid these mistakes:
Irregular GST Filing:
Even minor delays or mistakes can damage your credibility, so it’s important to avoid them.
Mismatched Invoices:
Ensure that your GST returns align with your invoices and financial statements to avoid rejections.
Underreporting Turnover:
Trying to lower tax liability by underreporting revenue can have negative consequences during loan evaluations.
Strong GST records are more than just a compliance obligation; they’re a crucial asset that can significantly enhance your business loan eligibility. By ensuring that your GST filings are accurate, timely, and transparent, you not only enhance your chances of obtaining a business loan but also establish your company as a credible and financially stable entity.
No matter if you’re a small business owner or at the chain of a large enterprise, prioritizing GST compliance is essential. Adopting this practice will open doors to new financial opportunities that can take your business to new heights.
