How Missing Documents Can Delay Your Business Loan Approval

Getting a loan is a moment when no delays can be managed. Whether you want to increase your business, buy new equipment, or improve your cash flow, in any of these situations, delays and disapproval can ruin your expectations.  

Imagine you have found the right lender, discussed the deal, and are done with formalities. Then you found out that one missing document has extended your verification process. Business loans don’t just rely on your credit score; they are heavily driven by the required paperwork. Missing it can shake your financial stability and business credibility. 

Read this article to know how missing documents can result in the delay of your business loan approval. And learn how not to get stuck during the business loan application process. 

Key Takeaways

• Incomplete documents can put a break on your application, and may result in the disapproval of the loan.
• Identity proof, financial records, and documents like ITR are required for a loan approval. 
• Missing any of the incomplete documents may result in delays and an extended verification process. 
• Many of the loan applications are rejected due to the unavailability of updated documents. 

Why Documentation is Necessary in Business Loan Approval 

In a business loan application, documents allow lenders to check the authenticity of the business, repayment capacity, and how compliant the business is with regulations. The application is incomplete if the required documents are missing. This requires the lender to re-verify details and increase the time taken to provide approval. In some cases, it may lead to rejection of the loan application. 

What are the Common Documents Required for a Business Loan? 

While the exact list of documents required varies among lenders, there are a few mandatory documents. Some of them are as follows. 

• Proof of Identity and Address: Documents of the borrower and the business, such as Aadhaar card, PAN card, and registration certificates. 
• Financial Records: Documents that provide information about the financials of your business, such as balance sheets, profit and loss statements, and bank statements. These documents also allow the lender to assess the business’s repayment ability. 
• Proof of Business: Documents that help lenders verify the legitimacy of the business. Some of the documents are GST registration certificates, trade licenses, or partnership deeds. 
• Income Tax Returns: ITR documents help lenders to verify the financial consistency of the business. 

What Happens if you Miss the Necessary Documents? 

Missing documents can have the following impact on your business loan application. 

• Extended Verification Process: If you miss submitting one or more documents, lenders may request additional documents. These additional requirements can extend the verification timeline and delay the approval by several days or even weeks. 
• Repeated Queries: Queries may arise regarding the legitimacy of the business if there is some paperwork missing. For example, if you miss providing necessary financial documents, the lender may repeatedly request clarification. This would slow down the approval process. 
• Possibility of Rejection: The strict policies of some lenders may require them to reject incomplete applications instead of slowing down the approval process for the required details. Due to this, the business may have to begin the application process with another lender. 
• Challenge in Business Planning: When the loan is delayed, it delays access to funds. If the funds were planned to be used as working capital or to purchase equipment, extended loan approvals may affect the business operations. 

How to Avoid Delays Due to Missing Documents? 

Delays caused by missing documents can ruin your expectations and may result in business instability. Explore the steps mentioned below to avoid delays due to missing documents. 

• Prepare a Checklist of Necessary Documents: Before you apply for a business loan, create a checklist of the necessary business loan documents. This list may also be provided by the lender on their website. Make sure to cross-check each requirement before submitting the application. 
• Update the Financial Records: Make sure that the financial statements, tax returns, and GST filings are updated. This allows you to avoid repeated queries during verification. 
• Make a Digital Copy of the Important Records: Digitising the necessary documents makes sharing with the lenders easier. This is especially useful if the physical copy of the documents is misplaced. 
• Clarify with the Lenders: If you are unsure about some of the specifics of the document requirements, contact the lender before submitting the application. This helps you avoid last-minute changes. 

Surprising Fact
In the financial year 2024-2025, over 8.18 crore ITRs were filed, and half of them were first-time taxpayers. 

Common Documents that Borrowers may Miss 

Most of the borrowers are unaware of the common documents required, which results in delays. Those common documents are:

• Updated address proof of your business premises. 
• Recent bank statements that showcase transactions of the last six months. 
• Partnership deeds are used if the business is a joint ownership. 

While some lenders may allow borrowers extra time to submit the necessary or correct documents, the application might be considered incomplete or non-compliant. This may result in the rejection of the application. 

Conclusion 

The time taken to receive approval for your business loan depends on how complete and accurate your documents are. Even small mismatches in the information provided may extend the approval timelines or lead to rejection. To avoid delays, businesses can prepare a checklist of the necessary documents, update their records, and make digital copies of the necessary documents. Proper documents can increase the chances of business loan approval. 

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