GST Surrogate Business Loan

A GST Surrogate Business Loan is a product offering to MSME business owners to procure funding based on their GST record. If you are an MSME entrepreneur with at least 2 years of GST record, this loan would be the recommended choice for your business.

Documents Required for GST Surrogate Business Loan

  •         KYC of the shop owner
  •         Proof of Ownership for residence / office
  •         GST Registration Certificate
  •         GSTR 3B for the last 24 months
  •         Business bank statements for the last 6 months
  •         ITR & Computation of Income for the last 1 year
  •         Loan obligation sheet

Uses of a GST Surrogate Business Loan

While the possibilities are endless, here are some common purposes for which a GST Surrogate Business Loan can be procured for your business:

 

  •         Meeting working capital requirements
  •         Procuring raw material
  •         Fulfilling bulk orders
  •         Maintaining a healthy cash flow
  •         Purchasing inventory
  •         Paying suppliers in advance
  •         Paying for overhead costs like salaries, rent, office expenses etc.

Eligibility Criteria

  1.     Promoter’s age should be between 25-60 years
  2.     Business should be at least 3 years old
  3.     Self-Owned Residence or Office
  4.     Have a minimum annual turnover of Rs. 2 crore
  5.     Have Bank statements for the last 6 months
  6.     Should not fall under blacklisted list of SBA finance

      7.     Trusts, NGOs and charitable organizations are not eligible

Features and Benefits of Loan

Most of the NBFCs and banks in the race of capturing market shares gave loans to customers based on surrogates which resulted in over leveraging. This is where customer takes undue advantage. Under this the customer approaches not only to one bank and takes money on the basis of surrogates thus defaulting in many cases.

But the scenario is changed completely. Surrogates would be helpful to a customer only once and if multiple applications of a customer will be seen then it may result into rejection of their accounts.

  1. Loan provided on basis of other Loan Track

If the borrower has taken other big loans viz., Equipment loan, Mortgage, Commercial vehicle loan etc., which are large in size and repaid the loan with a clean track record without any default, then the new lender can extend the same or a little lesser percentage of Home loan to the borrower.

  1. Funding depends on Bank Balance

For an industry where the turnover is very high but the profit margin is always low (certain trading business), the lenders do approve of the calculation basis the gross profit and not the net. Bank statements for the last 3-6 months are compulsory for ascertaining the credit worthiness of any customer. Therefore the majority of the banks have started asking for it.

  1. Gross Profit method

For an industry where the turnover is very high but the profit margin is always low (certain trading business), the lenders do approve of the calculation basis the gross profit and not the net.

  1. Turnover based on Industry Margin

If the borrower is in a manufacturing or trading business then a standard profit margin has been internally set by the borrower. For example, a manufacturing unit having 2 crores of turnover is expected to make a 10% profit and thus the income can be considered as 20 Lacs and basis this the loan application can be granted, even if it is not shown. Similarly, for a trading business, it could have been set at 5% as there’s no machinery etc. like a manufacturing unit as an asset, and been flagged at a little higher risk grade. At the same time, a service industry may not be considered for this type of surrogate funding at all.