Banks are practically synonymous with business loans and because they have been around forever, going to a bank for a business loan is generally the first instinct. For most business owners and entrepreneurs, banks have been a great alternative as they fulfil their needs of growing capital and offer faster finances and higher rates of approval.
Although the idea of taking a business loan from your bank is an alluring one, there are many things that you need to consider. Before plunging for a loan, you need to analyse what you would be up against and also the alternatives that may be available. If you are certain that you need a business loan, keep in mind another factor—the CIBIL Score.
CIBIL stands for Credit Information Bureau India Limited. The credit information company collects and maintains credit records of individuals as well as commercial organisations. CIBIL score reflects the credit score of individuals and commercial entities. It is a three-digit summary that ranges from 300 to 900, and it reflects the summary of someone’s entire credit profile. A score above 700 is considered to be good.
CIBIL score importance cannot be undermined as it determines the creditworthiness of a person or a business. It is a great tool for financial institutions to manage their business. When you take a business loan, your payment behaviour impacts the ratings. Thus, it would be apt to say that CIBIL score and loans share a love–hate association, and one cannot exist without the other.
When you take a business loan, your loan and credit ratings have an immediate correlation. The loan affects your spending capacity as well as your credit score. It, thus, impacts your capacity to borrow more money.
Just like an individual, the CIBIL score for your company is based on the credit behaviour that is listed in the “Accounts” and “Enquiries” sections of the Credit Information Report (CIR). When your company has been maintaining a good CIBIL score, you would enjoy benefits when applying for credit cards or loans. A good score reveals how your company would handle the credit/loan in the future, depending on your past performance.
The benefits of a good CIBIL score are aplenty. CIBIL score required for a business loan can range from 700 to 900. A score above 750 speaks highly of your creditworthiness and makes your business a good candidate for a small loan. As credit score is given based on your track record, debt payment behaviour and credit utilisation ratio, if your company holds a good CIBIL score it indicates that you have been diligent in financial management.
A strong score would give you access to powerful loans that too on a collateral-free basis. A good CIBIL score gives you a strong footing when you apply for a business loan.
A business CIBIL score below 650 can be called an average score, although some lender banks may find it to be below satisfactory. For many banks, the minimum cibil score for business loans is 650. If you have a score below this, the loan procedure may be an uphill task. Most banks would have a stringent application procedure and funding may become a hurdle. Some banks may accept your loan application but not offer a high amount.
Sometimes, low scores may also lead to outright rejection of your loan application, thus seeking a business loan with a low cibil score would become a real challenge. In such a scenario, it is best to take a step back and try to work on your CIBIL score. You may apply when you can improve the score and are in a better position to ask for a business loan. This would also save you from the rejection of loan applications and hard inquiries.
With a legacy of over 43 years, Shriram Finance has been empowering micro to medium businesses. The company offers you the capital for your investment in equipment, infrastructure or machinery. Here are the top benefits of taking a business loan from Shriram Finance:
If you are an entrepreneur or a businessman who is searching for a business loan but have got your application rejected from a bank, get in touch with Shriram Finance today. Shriram Finance understands that there are many financial challenges you may face when you wish to manage and grow your business.
The CIBIL Score is the first impression of your company on the lender. A good CIBIL score would always pay off and the creditworthiness of a firm organisation is a cardinal element that a lender would pay attention to. A major benefit of good CIBIL is that it will help you in getting loans and credit cards for your business at comparatively lower interest rates. You can check .
If you meet the basic requirements, taking a business loan would not be painstaking, tiresome or disappointing. Your CIBIL score is a vital element when it comes to achieving business goals.