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‘Aarav, one night before the audit: "Excel khol diya, ab bhagwan ji aap kar lo."’
He had applied for a ₹4 lakh personal loan to cover his sister’s wedding expenses. But to his surprise, the bank rejected his application because of his low eligibility. Here is what went wrong with the application:
Criteria Checked | Aarav’s Details | Bank’s Minimum Requirement |
Monthly Income | ₹28,000 | ₹25,000–₹30,000 |
672 | 700+ | |
Current EMIs | ₹9,000 | Should be <50% of salary |
Job Stability | 10 months | Minimum 1 year preferred |
‘Sab kuch bhawan par nahi chhodna hota!’ Understand the eligibility rules before applying for the personal loan. In this blog, we’ll discuss the process step by step so that you can improve your chances of approval.
Meena, a graphic designer in Hyderabad, is preparing for her ₹3 lakh personal loan audit. She:
Downloaded business and personal bank statements for the past 12 months.
Read More – The Creditworthiness Checklist Every Small Business Owner Ignores
Collected her last 2 years of P&L, balance sheet, and cash flow statements from her accountant.
Pulled the loan agreement, interest schedule, and EMI info.
Retrieved her past 2 years of tax returns and GST filings.
She then organised everything into clearly labelled digital folders on her system. The table shows a quick summary of the documents she prepared.
Document Type | Period |
Bank Statements | 12 months |
P&L, Balance Sheet, Cash Flow | 2 years |
Loan Agreement & EMI Schedule |
After gathering all documents, Meena moves to the next phase: ensuring the numbers add up perfectly.
She reconciled bank statements for both her personal and business accounts against her bookkeeping records over a 12-month period.
She discovered 24 discrepancies, like:
₹1,200 in unrecorded cheque withdrawals
₹840 in bank charges not captured in her books
Then she made 27 adjusting journal entries, including clearing those 24 discrepancies and adding 3 missed entries (late payment receipts).
Finally, she completed a self-audit checklist covering reconciliation accuracy, documentation presence, and sign-off.
Task | Details |
Reconcile the bank vs the cash book | Covering Dec ’23 – Nov ’24 (12 months) |
Identify discrepancies | Cheques, charges, timing |
Adjust internal records |
Once her financials were organised, Meena needed to prove she could repay the ₹3 lakh loan. Her lender expected a stable cash flow that would support monthly EMIs. She calculated her business’s average monthly surplus and matched it against the proposed EMI to avoid penalties and late fees.
Particulars | Amount / Value |
Average Monthly Business Income | ₹1,10,000 (Based on the last 6 months) |
Average Monthly Business Expenses |
₹75,000
Net Monthly Surplus
₹35,000
Proposed EMI for ₹3 lakh loan @ 12%
₹9,964
Total Interest
₹3,58,715
N/A
Tax Returns + GST Filings | 2 years |
Journal entries |
Document & explain corrections | Notes attached to adjustments |
Self-audit using a checklist | 10-point pre-audit checklist |
*T&C Apply
Total Amount Repaid
₹3,58,715 |
EMI-to-Income Ratio
9%
Although the loan is for business purposes, the bank also assesses Meena’s personal creditworthiness. So, Meena reviewed her credit report, listed her current liabilities, checked utilisation levels, and ensured all past-due accounts were cleared.
Also Read - Top 5 Reasons Small Businesses Take Out Loans
She didn’t want anything on her credit profile that would trigger red flags during the lender’s audit.
Credit Parameter | Details / Value | Audit-Relevant Notes |
CIBIL Score | 732 | Above typical lender cutoff (700); reflects a stable history |
Active Personal Loans | 1 | Balance ₹75,000; 7 months left |
Existing Loan EMI | ₹3,800/month | Never delayed; reflects responsible repayment |
Credit Cards Owned | 2 | SBI Cashback & ICICI Coral |
Total Credit Limit (across cards) | ₹1,60,000 | Moderate combined credit line |
Current Card Outstanding | ₹34,800 | Paid in full last 3 cycles |
Credit Utilisation Ratio | 22% | Healthy usage (below 30% limit) |
Overdue or Settled Accounts | 0 | No defaults, write-offs, or settlements |
Credit Report Errors Found | 1 outdated closed loan showing active | Disputed and corrected via the CIBIL portal |
Total Monthly Debt Obligation (EMIs + CC min.) | ₹4,600 | ₹3,800 EMI + ₹800 minimum card due |
Debt-to-Income Ratio (Total ÷ ₹1,10,000) | 4.2% | Far below the lender max threshold (30–40%) |
Preparing for your first business loan audit isn’t like an exam. It’s the aftermath. You need different documents to get into your dream college; similarly, you need certain documents to prove you can repay the loan. You also need a good personal credit history.
After organising the documents, reconcile your records to evaluate EMI capacity and credit health. Each step increases your approval chances. Stay audit-ready, and you’ll turn loan anxiety into financial confidence and better borrowing outcomes.
1. How to prepare for your first-time audit?
Compile and understand documentation (policies, financials, records), map processes, perform internal reviews, train staff to answer confidently, and ensure transparency. Early preparation builds auditor trust.
2. What are the 3 C’s of auditing?
In remote and internal audits, the three critical elements are: Computer use (technology reliance), Collaboration (team engagement), and Corroboration (evidence validation to support audit findings).
3. What should you avoid saying during an audit?
Don’t overuse words like “it seems”, “always,” and “never”. Refrain from assigning blame, and don’t offer documents or opinions they have not asked for. Stay factual, specific, and neutral.
4. What are the five C’s of internal auditing?
The five C’s: Criteria (audit standards), Condition (observed issues), Cause (root reasons), Consequence (impact), and Corrective Action (remediation plans).
