CIBIL Score Required for Business Loan

What is the CIBIL Score Required for Business Loan?

Business owners usually need financial help over and over again. To turn the entrepreneurial vision into reality or to keep an existing company afloat, they borrow money from banks and financial institutions. The loans with attractive interest rate fuels such businesses and enables people to engage in healthy economic trading. Unfortunately, not every business can get such good loans.

A business with a low credit score will not be qualified to receive a loan quickly. Hence, to increase your chances of getting a loan instantly with a better interest rate, higher amount, and a longer tenor, you need to acquire your CIBIL Company Credit Report (CCR), understand the business loan types on offer, and the evaluation methods.

If you are not sure where to start, fret not. This article will guide you suitably in this area.

What is a Company Credit Report?

CIBIL produces Company Credit Report (CCR) based on the data submitted by banks and financial institutions. CCR is not a credit rating. Instead, it is a record of a company’s credit history. Banks review your company’s credit report to assess your loan applications.

CIBIL produces Company Credit Report (CCR) based on the data submitted by banks and financial institutions. CCR is not a credit rating. Instead, it is a record of a company’s credit history. Banks review your company’s credit report to assess your loan applications.

What does a Company Credit Report Contain?

1. Report Order Number: Number which is generated when the customer’s company report is accessed from CIBIL.

2. Report Summary: Comprises a number of financial facilities and institutions which have granted you loans and so forth.

3. Profile Section: Contains company name, class of activity, DUNS number, etc.

4. Credit Facility Details: Contains credit facility details availed by a firm.

5. Credit Type & Enquiry Summary: Includes loan types availed and the number of inquiries made by institutions in the last 24 months.

6. Credit Facilities Guaranteed: Contains credit facilities assured by the borrowing entity.

7. Relationship Details: Includes the details of Directors, Partners, Shareholders, and Holding Company, amongst others.

8. Inquiry Details: Comprises details of the number of times the company’s credit report has been demanded by a credit institution.

9. Guarantor Details: Includes the details of individuals or business entities guaranteeing the credit facility availed by a firm.

What are the Evaluation Parameters Used by Lenders?

Lenders use CCR to make informed decisions based on the following parameters.

1. Capital

Before approving your business loan application, the lenders will inspect the class of capital the owner has devoted to his firm. Hence, prior to applying for any loan, he has to make noteworthy investments to be entitled to acquiring a loan.

2. Collateral

Your business loan gets approved quickly if the application consists of several types of collateral in the form of equipment, accounts receivable, inventory, and property, amongst others.

3. Leverage

Your amount of debt on a company’s balance sheet will be scrutinized by the lenders.

4. Gross Profit Margin

Your net sales minus the cost of sold goods will also be analyzed.

5. Reimbursement Capacity

Lenders evaluate a loan application based on the repayment history of the firm to decide if it has a good track record. Defaults or late payments by a company will result in the loan application being rejected.

6. Turnover

Lenders will examine the annual sales volume of sales taxes as well as discounts.

7. Inventory

Lenders review the company’s goods and raw materials, which are ready for sale.

8. Liquidity

The amount of working capital of a company will be reviewed by the lenders.

What does not affect your Company’s CIBIL score?

Your credit score will not be affected by the following:

  1. Current account
  2. Savings account
  3. Investment account
  4. Savings held in the past
  5. Trading accounts
  6. Fixed deposit accounts
  7. Your education level
  8. Your ethnicity
  9. Your annual income
  10. Your gender
  11. Your race

How to Check the CIBIL Score for Business Loan?

You can check your CIBIL score through online as well as offline methods. To get your company’s credit report online, visit www.cibil.com, and submit all the required identification and address proof documents.

To learn your score offline, you can either apply for a credit report via post or visit the bureau by yourself. In case, if you are applying via post, you are required to furnish some of your documents. Once the authority verifies and authenticates the document, your credit report will be sent to you by mail.

Note:

1. As per RBI guidelines, you are entitled to obtain a free credit rating check once a year. If you have already availed this free check in the year, you can get it again by making payment to the CIBIL.

2. There are multiple credit bureaus in India, and each of them uses its dedicated scoring procedure that has nothing to do with CIBIL. So, don’t be confused by them. The TransUnion CIBIL agency is the one we are speaking about in this article.

How to improve your company credit score?

If you need a business loan, you are required to improve the current CIBIL score as early as possible. However, this task might not be that easy. We have mentioned some of the ways to improve the CIBIL score that offers a better chance of getting a business loan sanctioned. Let’s explore more about it below.

  1. Sustain credit utilization ratio beneath 30% of the overall credit limit
  2. Abstain from being a guarantor for a co-borrower or anyone
  3. Refrain from making pointless loan inquiries
  4. Try not to close any old bank accounts or credit cards
  5. Identify and resolve the inaccuracies in the credit report earliest
  6. Pay off all credit card dues and debts in the form of EMIs on time
  7. Develop a balanced mix of credits, and opt for unsecured loans
  8. Request the bank to raise your credit card limit

The Bottom Line:

Remember not to fret, even if you have a low CIBIL score. Your loan application will still be approved but at a higher interest rate. By following the measures highlighted here, you can obtain the sweet spot to seek business loans. So, keep these things in mind and gain control over your business credit report in a shorter period.

Are you looking to Improve your Company Credit Score? Contact us

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