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.
Understanding 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
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.
CIBIL™ Score for a business loan
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.
Benefits of good CIBIL™ Score
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.
Business loan with a low CIBIL™ Score
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.
You can take the help of the following tips to improve your business CIBIL™ Score:
1.If you have any ongoing company loans, ensure you pay the dues on time.
2. In case of any discrepancy in the financial statement, get the error rectified immediately.
3. Have a well-balanced combo of secured and unsecured loans.
4. Limit your business expenses and debt and do not be credit-hungry.
5. If you/your company is a co-borrower, you would have to pay for their negligence.
6. In case you require immediate funding, you may try to:
- Apply for a loan with a creditworthy business partner
- Show the presence of valuable assets that can be liquidated if need be
- Opt for a secure loan
Why Shriram Finance
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:
1. Flexible Loans: With Shriram Finance, you can get a loan with an interest rate of 15% for your micro, small and medium business.
- The company offers loans for shorter durations, and its wide spectrum offers loans from 1 lakh to 1 crore rupees.
- The tenure of the loan can also be of 12–60 months, as per your needs.
- You can repay through EMIs or set up ECS payments.
2. Quick approvals and procedures: Once all eligibility requirements are met, your online application will be processed quickly. You can also visit a company office to apply.
3. Economical interest rates:Based on your profile and particular business needs, you can avail of customised loan solutions for your business.
4. Easy access: With 3600+ branches across the length and breadth of the country, you can get in touch with Shriram Finance easily.
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.
Conclusion
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.
