Importance of Credit Score for availing a Business Loan

CIBIL Score for a business loan : Read to know the 4 reasons why good CIBIL scores can improve your chances of getting business loans sanctioned. Visit to know more!

28 Jan,2022 08:22 IST 905
Importance of Credit Score for availing a Business Loan


MSMEs are growth accelerators of any economy, and the Indian economy is no exception. However, convenient access to affordable capital is a must for small businesses to thrive and scale consistently. 

Business Loans are an excellent tool to access timely financing. But to be eligible for them, it is essential that MSMEs maintain a good credit score.

A credit score is a numerical representation of the business's creditworthiness. It is a three-digit number ranging from 300-900 calculated by the Credit Information Bureau India Limited (CIBIL). The credit score calculation is based on several factors such as overall debt, repayment history, credit utilisation ratio, overdue amounts, and credit tenures. Lending institutions consider a credit score of 650 and above as creditworthy and favourable. 

 

What does a good credit score mean for a business loan approval?

A good credit score demonstrates a business's credibility and reliability in honouring debt and other financial obligations. Lenders consider a good credit score to evaluate the stability of operations and the consistency of a business in generating revenue. The higher the credit score, the higher are the chances of a company receiving timely business loans.

 

How to check CIBIL score?

IIFL Finance provides free access to check CIBIL scores online. Log into the IIFL Finance website  and fill in a form specifying details like name, date of birth, PAN card, pin code, mobile number, and email-id. Generate a free CIBIL report and know how to improve your CIBIL score.
Here are 4 reasons why a good CIBIL score is essential to get a business loan approval:

 

Ease in approval of loan
Lending institutions are open to lending to businesses with a good credit score as they are considered creditworthy. A good credit score demonstrates the borrower's ability to make the repayments on time, and companies that have a good credit score can secure better deals on business loans. 

 

Competitive interest rate and term of loan
A low interest rate reduces the entire cost of the loan and enables business owners to manage their finances judiciously. A good credit score indicates lower chances of default, making businesses eligible for lower interest rates, better repayment terms, and favourable loan conditions such as low processing fee, better loan tenures, etc.

 

Access to higher credit limits
A good credit score is directly proportional to the credit limit sanctioned. Businesses with excellent credit scores can access a higher amount of borrowings. Access to a higher limit means more funds to meet operational expenditures and invest in growing the business.

 

Securing new clients
A good credit score is essential to get funds quickly and helps secure new clients. Top customers look at a credit score as an indication of a stable business with steady operations. A good credit score helps in building credibility and trust with prospective customers.

Business loans help enterprises to stride forward. They drive business growth and enhance productivity. However, it is essential to maintain a good credit score to get business loans. A good credit score will provide businesses with competitive interest rates and opportunities to secure better deals on business loans.

IIFL Finance is a leading NBFC offering financial solutions such as business loans
, gold loans, and personal loans. It provides quick and instant business loans up to ₹10 lakh disbursed within 48 hours starting at an interest rate of just 11.75% p.a. 

Click to check your CIBIL score online for free and get a business loan today!

Also Read Here: Can I use Personal Loan for Business loan purposes

Disclaimer: The information contained in this post is for general information purposes only. IIFL Finance Limited (including its associates and affiliates) ("the Company") assumes no liability or responsibility for any errors or omissions in the contents of this post and under no circumstances shall the Company be liable for any damage, loss, injury or disappointment etc. suffered by any reader. All information in this post is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results etc. obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. Given the changing nature of laws, rules and regulations, there may be delays, omissions or inaccuracies in the information contained in this post. The information on this post is provided with the understanding that the Company is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. This post may contain views and opinions which are those of the authors and do not necessarily reflect the official policy or position of any other agency or organization. This post may also contain links to external websites that are not provided or maintained by or in any way affiliated with the Company and the Company does not guarantee the accuracy, relevance, timeliness, or completeness of any information on these external websites. Any/ all (Gold/ Personal/ Business) loan product specifications and information that maybe stated in this post are subject to change from time to time, readers are advised to reach out to the Company for current specifications of the said (Gold/ Personal/ Business) loan.

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