How To Check CIBIL Score For A Business Loan?

A business loan can be useful for any businesses to raise money to meet their financial requirements. But Cibil score plays an important role while availing a business loan. Read to know how to check Cibil score?

10 Oct,2022 12:47 IST 3 views
How To Check CIBIL Score For A Business Loan?

Every company requires a fund infusion every now and then. Small businesses, in particular, frequently struggle to meet all of their financial requirements and must borrow money to maintain and grow their operations.

Although either debt or equity capital can be used to finance a firm, the latter may not always be an option. More importantly, borrowing money is often necessary and may be the best course of action when creating a business strategy. This could be to meet both short-term or working capital needs to run everyday operations or for future expansion with a term loan.

There are two types of business loans: secured and unsecured. With some security, a secured business loan can be obtained. This could be a fixed asset, such as the organisation’s office building or factory or warehouse. But an entrepreneur can also avail unsecured business loan.

What will decide whether a lender gives a business loan?

Before deciding to authorize a loan, and determine the interest rates and payback terms, a lender considers the credit score of a business owner or entrepreneur, just as they would in the case of a personal loan.

This is accomplished using the business owner’s credit score, or CIBIL score, which considers the repayment history of prior loans taken by the individual. Even if they have never taken out a business loan, they may still have a credit history based on credit card payment history or personal loans.

CIBIL Score

The borrower’s credit history, which includes details on the total amount due, any open loan at the time, and most significantly, the repayment behaviour, is used to calculate the CIBIL score.

In India, four major credit bureaus that give credit scores are TransUnion CIBIL, Experian, CRIF Highmark and Equifax.

You can visit cibil.com to request your CIBIL score. Many banks and non-banking finance companies also offer this facility; all you have to do is log into their website and fill up a short, online form. To obtain your credit report, you must provide personal information such your name, permanent account number, and date of birth.

This score is a three-digit numerical summary of a person’s credit history. It runs from 300 to 900 and varies over time. The closer this score is to 900, the greater the likelihood that the loan application will be accepted. Lenders frequently use the score as a general guide, hastening the approval of loans.

Any score above 750 is thought to be good, but it doesn’t imply someone with a score below that can’t get loans. One can obtain a loan even with a low credit score, but the cost of the loan, or the interest rate charged, increases.

Conclusion

Depending on a variety of factors, lenders decide whether to lend money to a business and under what conditions. The business owner’s CIBIL score is one of the most important considerations, especially for unsecured business loans.

The minimum score required for obtaining a business loan varies from lender to lender, but it often ranges between 650 and 680. With a lower score, it may still be possible to borrow money for commercial purposes, but the restrictions will probably be more stringent and interest rates will be high.

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