Can an working capital loan get a loan with a low credit score?

It is possible to get a working capital loan with a low credit score in India, but the process is more challenging and comes with stricter terms.

• Lenders, especially traditional banks, usually prefer applicants with a credit score of 700 or above. For NBFCs, a score around 685 is often considered acceptable.
• If your score is below this, you may still be eligible, but you will likely face higher starting interest rates, a lower loan amount, and stricter repayment terms.
• To offset the risk, lenders may ask for additional documentation, higher collateral, or a guarantor with a strong credit profile. Some NBFCs and small finance banks are more flexible and may consider your business’s cash flow, turnover, and profitability rather than relying solely on your credit score. Secured working capital loans, where you pledge assets, are easier to obtain with a low score than unsecured loans.
• Expect higher interest rates and stricter terms with a low score.
• Collateral or a guarantor may be required.
• Lenders will check your business’s financial health and operational history.
• NBFCs and small finance banks are more open to lower scores than traditional banks.
• Timely repayment of a working capital loan can help rebuild your credit score.
• Improving your credit score by paying bills and EMIs on time, reducing outstanding debts, and maintaining a healthy business turnover will help you access better loan options in the future.