How to Take a Business Loan on Your Aadhaar Card?
Jul 24, 2021
A business operates in an environment of uncertainty. Macro factors (economy, policy, regulations, climate, and more) and inherent situations can also sometimes become a stumbling block, particularly for a small business. The most common issue is a sudden cash crunch.
A short-term business loan can be of crucial help at the time of need. Small business owners will vouch for the criticality of a loan at difficult times and how effective the loan can be in helping a business re-energise and regain vitality.
For a company or a business to look for an immediate loan source to tide over a sudden emergency may be challenging. Banks are a traditional source of funds but cutting through the layers of procedural requirements is time-consuming and uncertain.
Your Aadhaar card can help you with an Aadhaar-based loan for your business.
How does an Aadhaar card help you to get a loan? Does it have a different version for financial use? No, the Aadhaar card is an identity document and is not a particular financial product, but the card details make your verification process simpler and faster.
The unique identification system of Aadhaar has your details, like name, date of birth, residence address, photo, and biometric prints on their (UIDAI) database. The lender checks your details for establishing the correct identity, which is a critical requirement of a loan process. Typically, most banks and other financiers prefer to use the Aadhaar data as a reference document while deciding on loan applications.
Today the Aadhaar card has emerged as a significant part of the Indian financial system with links to the PAN (Permanent Account Number of the Income Tax department) of an individual (or a company), your mobile number, and bank accounts. When you apply for a loan on an Aadhaar card for company or business purposes, your application is processed with minimal paperwork.
How to get a business loan on an Aadhaar Card?
Pre-requisites for a loan with an Aadhaar card:
- Linking of Aadhaar number with your bank accounts, both personal and business.
- Linking with the Permanent Account Number (PAN).
- Your mobile phone must be linked to the Aadhaar number.
- Though not mandatory, linking your Aadhaar number with other identity documents like Voter ID, ration card, LPG connection, etc., is advisable, just in case the second line of reference checking is required.
Eligibility Criteria for an Instant Loan on Aadhaar Card
- The age of business must be one year+ from the date of registration.
- Minimum monthly business turnover should be Rs.200,000/-.
- The individual responsible for the business loan must be above 21 years and below 65 years.
- Small individual corporations, sole proprietorship firms, and private companies in manufacturing, trading, or providing services can avail business Aadhaar loans.
Documents Required for an Aadhaar Business Loan
- PAN card: Personal and business.
- Aadhaar card
- Last six months’ bank statements of the business account (of all accounts, in case more than one)
- GST registration certificate
- Shop and establishment certificate
Features of a Business Aadhaar Loan
|Loan Amount||Rs.50,000 to Rs. 1 crore|
|Tenure of the Loan||From three to 24 months|
|Rate of Interest||Depends on your business profile, loan tenure, and eligibility; within the range of standard market interest rates for similar loans and starts from 1.33% per month.|
|Processing Charges||Usually, 2% of the loan amount|
|Repayment||Flexible options to suit your business needs|
|Approval Time||48 hours|
|Application procedure||Regular offline and convenient Aadhaar card loan online application|
Business Aadhaar Loan – Tax Benefits
A business loan with an Aadhaar card qualifies for tax benefits. The interest you pay on the principal amount of the loan is tax-deductible. The income tax rules permit the interest component of a business loan to be treated as a business expense, thus making it eligible for a tax deduction. Therefore, when finalising the tax return for your business, the interest paid on loan repayment should be deducted (along with other permitted business expenses) from the gross income.
Please remember that the principal amount of a business loan from an Aadhaar card is not eligible for tax benefits.
For EMI–based repayment options, a separate declaration from the lender specifying the interest is necessary. Without clarification, EMI-based repayment is not eligible for any tax benefit. Therefore, you need to keep close track of your Aadhaar card loan details when choosing the EMI option.
Business loans are a type of funding and are not to be confused with income. We now understand the business loan eligibility criteria and also the documents required for a business loan – let us now find out whom to approach for a business loan in India.
Where to Get an Instant Loan on an Aadhaar Card?
Banks are the traditional source of funds for businesses. However, the main disadvantage of dealing with banks is the duration of the entire loan process, from application to disbursement. Besides, banks require lengthy documentation in their formats, which may further delay the application. Online lenders or digital finance companies are a dependable alternative. Most finserv platforms (online lenders), such as FlexiLoans, offer varied financing choices to suit specific requirements. As a result, you can complete the entire hassle-free online process and save you considerable time. Besides, FlexiLoans platforms offer business loans without collateral, with flexible interest rates and repayment plans to suit your convenience.
Apply Online for an Instant Loan on Aadhaar
Online application for an Aadhaar card loan is a simple process involving submitting soft copies of a few documents in support of your personal information and business status.
- Check your eligibility for a small business loan by visiting the website of the FlexiLoans.
- Complete the simple application process online.
- Submit the required documents.
- FlexiLoans will evaluate your application and credentials.
- You will receive an agreement from the lender once your loan is approved.
- On completion of the agreement process, the money is transferred to your bank account.
Your Aadhaar card loan online procedures are complete.
Using Your Business Aadhaar Loan
Loans should be used for the purpose indicated in the application. Usually, small short-term loans are used for tiding over a sudden emergency like salary payments or clearing debts or repairs. However, you can also plan to use it for renovation, productive investments like creating a website or promoting your business. You may also buy equipment to facilitate your operations.
What Influences Your Loan Application?
It is not only Aadhaar card loans, but all unsecured small business loans depend on the evaluation parameters of the lender, either a bank or a financial institution. The primary task of a lender is to ensure the safety of the loan money.
For every loan application, lenders create a risk profile of the individual/business entity based on the documents and other available information. When you apply for an Aadhaar card loan online or complete the Aadhaar card loan apply procedures, the lender evaluates your application as per their internal criteria. What are the parameters?
1. Financial Standing of the Company
Lenders judge the status of your business from the financial statements. They look for consistent cash flows, sound accounting practices, and the level of financial reserves.
2. The Plan of Utilisation
The plan of utilisation against a particular loan is a significant statement expressing your intent. Lenders analyse the reason/s behind your loan and apply their evaluation criteria to the financials of your company. When you plan to get a loan on an Aadhaar card or any other business loan, it is always advisable to submit a utilisation plan along with the application. Utilisation details enable a lender to decide on your application faster.
3. Credit Score
Credit scores are an essential aspect of loan eligibility. A CIBIL (India’s leading credit information company) score of 700+ is considered suitable for all loans. A low score may push up the interest rate. A rating less than 650 may diminish your chances of a loan.
4. Loan Amount
The financial support you request through a loan must be based on extensive situational need analysis. A high amount runs the risk of being turned down, while an undervalued proposal may not justify the purpose. You need to tackle the sensitive issue of the loan amount by using your expertise in matching the fund needs of the business, the expected benefits, and the future cash flow estimates. A loan request in line with the financial status of your company gets cleared fast.
The Aadhaar card is now deeply integrated with the Indian financial system. In addition, mandatory linking with other documents has increased the scope of the Aadhaar number.
Banks and financial institutions can easily verify the background information with minimal paperwork. As a small business owner, you can avail of an online business loan by submitting a few essential documents fulfilling business loan requirements along with your Aadhaar card details.
Digital platforms like FlexiLoans take very little time to clear your application and disburse the loan amount to your bank account. The speedy process results in making funds available in time for your business to tide over a sudden emergency or arrange necessary equipment.