The salaried job holder and the non-salaried businessman may both approach the bank for a loan at some point of time. In India, there are many enterprising medium to small level entrepreneurs who would like to opt for loans. How easy is it for them to borrow money from the bank – a home loan, for instance?

In the case of a salaried person seeking a home loan, the banks follow a straight forward standardized procedure. However, lending money to a business man is a different thing altogether.

Banks are generally reluctant to sanction a home loan to a non-salaried person, simply because they are not convinced about the repaying capability of the borrower, on a monthly basis. Although banks are re-looking into their regulations in an attempt to simplify borrowing procedures for entrepreneurs, it is still a different set of processes that a self employed person has to follow. It might be difficult for a non salaried person to get his or her loan sanctioned, but it is not impossible.

One advantage that the non salaried borrower has, is that the loan-to-value or LTR ratio is much lower. A salaried person, for example, seeks a loan worth 80% of the value of the property, compared to an entrepreneur’s 55-60%.

Although banks are more exacting and follow rigid criteria while loaning money to entrepreneurs, getting that desired loan should not be an issue, if you have an impeccable and sound business record over the immediately preceding three years and your income tax returns show a stable income. Your documentation should be perfect in order for the bank to sanction the loan without hesitation. Before you walk into the bank, make sure you have the following:

 KYC (Know Your Customer) documents
 Proof of Income documents and bank statements as per log-in checklist
 Property related documents
 Copy Income Tax Returns of last 3 years along with computation of income (this should be attested by a Chartered Accountant)
 Copy of the Balance Sheet and Profit & Loss Account of last 3 Years of your firm (attested by a Chartered Accountant)
 Brief Business Profile on the Letter Head of your firm
 Bank Statement for the last one year of your Savings and Current Accounts
 Copy of Shop & Establishment License / VAT Registration or any other mandatory license / registration
 Copy of the Partnership Deed (if applicable).
 Copy of Tax Deduction certificate / Form – 16A (if applicable)
 Details of Contract (if applicable)
 Copy of Advance Tax paid / self assessment tax paid Challan
 Copy of Certificates of your Educational Qualification
 Copy Professional Practice Certificate
 Salary Certificate (applicable if you are a doctor having salaried income)
 Photo – ID Proof: A photocopy of any one of the following:
Pan Card / Passport / Voter ID Card / Driving License
 Proof of Residence: A photocopy of any one of the following:
Electricity Bill / Telephone Bill / Ration Card / Letter from Employer / Bank Statement

Remember that borrowing money has its own benefits as well. You can claim Income Tax exemption of upto 1.5 lakhs for the amount of interest paid in a given financial year under section 24 and upto 1 lakh for the amount of principal repaid in the year. Thus, the total amount of exemption you can claim is Rs 2.5 lakhs!

So, if you are a self employed person and thinking of taking a loan, keep your documents ready and without much ado, your loan should be sanctioned sooner than you realize. All the best!