From GST To Growth: Leveraging Returns To Secure Bigger Loans

Pragya is a small-scale manufacturer of electrical equipment. She applied for a loan of ₹30 lakh last year. In the beginning, her lender offered her just ₹10 lakh.

But then she submitted two years of well-maintained GST returns reflecting turnover growth from ₹48 lakh to ₹72 lakh. Now, her 

lender revised her approved amount to ₹25 lakh.

You might be thinking what changed her lender’s mind? The answer is her tax data. It has become a trend nowadays. 

Whether you run a trading unit or a service business, consistent GST returns can help you secure higher credit limits without relying heavily on traditional financial statements or collaterals.

Understanding GST-Linked Business Loans

Such loans are offered based on the sales and tax data reflected in your GST returns. Nowadays, lenders just don’t want to rely only on your balance sheets and profit & loss statements. 

They are now reviewing your GSTR-1 and GSTR-3B to get a transparent view of your operations. Using this method, they understand your:

• Revenue patterns
• Tax compliance
• Customer base

Why Does Lender Check GST Returns Before Sanctioning Loans?

• Turnover Tracking: Your sales mentioned in GSTR-1 helps to assess your business performance.
  
  
• Tax Discipline: If you file regularly without any delay then it shows that your business is financially active and compliant.
  
  
• Reduced Fraud Risk: If your GST numbers are verified with PAN and Aadhaar then it will minimise identity risks.
  
  
• Quicker Processing: Data pulled directly from the GST portal reduces document dependency and speeds up evaluation.

The following is an example of loan eligibility based on GST turnover:

How Do GST Returns Help You Access Higher Credit Limits?

1. Establishing Consistent Business Income

If your business shows a stable or growing turnover through GSTR-1 filings then it improves your chances of qualifying for a larger loan.

2. Demonstrating Timely Tax Payment

If you are paying GST on time, it shows your good financial discipline. It is one of the strong factors in the lender’s decision-making.

3. Automated Eligibility Checks

If your lender is using API-based systems, then it can analyse your GST profile and instantly determine your eligibility. Also, it reduces your approval timelines to 3 to 5 working days.

4. Helping You Get Pre-Approved Offers

If you are consistent with your GST filings then it allows financial institutions to offer ready-made loan products without waiting for lengthy documentation.

Read More – How to File GST Return
 

The following is the comparison between GST-based loans and traditional loans:

Improve Your GST Profile Before Applying For A Loan

• You should file a return on or before the due dates. 
  
  
• You should reconcile your GSTR-1 and GSTR-3B.
  
  
• You should show stable monthly sales.
  
  
• You should limit large input credit deductions.

Common Use Cases For GST-Linked Loans

• Festive Season Stocking

Retailers like you use GST returns to prove their seasonal demand and access working capital for inventory.

• Supplier Payment Cycles

If you are a trader who purchases in bulk, then you can use GST return records to justify larger credit requirements.

• Business Expansion

Wholesalers like you with rising GST sales often use loans to open new branches or invest in logistics.

Also Read - How to Improve Your Business Loan Eligibility in 6 Months
 

Examples Of GST-Based Lending In Action

Documents Usually Asked By Lenders

Mistakes To Avoid Before Applying For A Loan

• You should avoid filing zero GST returns while doing business.
  
  
• You should avoid delays or missing returns in the last 12 months.
  
  
• You should avoid discrepancies in GSTR-1 and GSTR-3B.
  
  
• You should avoid a high ratio of purchases without output tax.
  
  
• You should avoid GST cancellation due to non-filing.

Final Thoughts

If you still think that GST returns are just tax documents then you are wrong. They are powerful financial tools that can open the door for you to better funding opportunities. If your GST filing history is timely and well-maintained that speaks volumes about your business’s health.

If you are a service provider or a trader, your returns can help you avoid heavy paperwork and get access to higher loans quickly. You must not underestimate the value of your GST profile if you are planning to:

• Expand your operations
• Invest in infrastructure
• Need working capital support

It could be your strongest asset when approaching lenders.

FAQs

1. How much GST history should I have before applying?

At least one year of consistent filings is usually preferred.

2. Are all lenders offering GST-based loans?

Many digital lenders and even traditional banks offer these loans.

3. What happens if my GST filing is delayed?

Delayed filing can reduce your chances of getting favourable terms.

4. Do I need to mortgage property for GST-based loans?

Not always, many are collateral-free.

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About the Author

LoansJagat Team

We are a team of writers, editors, and proofreaders with 15+ years of experience in the finance field. We are your personal finance gurus! But, we will explain everything in simplified language. Our aim is to make personal and business finance easier for you. While we help you upgrade your financial knowledge, why don't you read some of our blogs?