How Can I improve My CIBIL Score In Order To Get A Business Loan?
Cibil score is an important factor when availing a business loan. The borrower should maintain a good cibil score to get business loan. Read to know the steps to improve your cibil score.
An entrepreneur must plan for growth and shore up capital resources. This can be for purchasing a new machine for a factory, for expanding office space for employees, for buying raw materials or even for hiring more hands.
A business loan is often seen as the prudent form of capital to meet both short-term or working capital needs to run operations or for future expansion with a longer-term loan.A business loan can be of two types: secured or unsecured. A secured business loan would be against some collateral, which could be the factory premises owned by the organisation or the machinery inside and so on.
But entrepreneurs can also avail unsecured business loan up to a certain sum without pledging any asset. Lenders typically offer unsecured business loans of up to Rs 50 lakh based on the income generation profile of the business. In such business loans, one of the most important things that play a part is the credit score of the business owner.The credit score, also commonly known as the CIBIL score, is calculated via a set protocol according to one’s credit history. This could be a personal loan or a housing loan availed by the business owner or even the credit card usage and repayment history related to those debts.
The credit score is a three-digit number that varies from 300 to 900. The higher the number, the better the chances of getting a loan sanctioned, and vice versa. The score is the first filter used by lenders to assess if the borrower will pay back the money.Improving The Score
There are several ways that one can use to improve the credit score with an aim to make it easier to borrow in the future.• The most important factor is that one should ensure one never misses a payment due for a credit card bill or for the equated monthly installments for other forms of loans. If one keeps paying back the minimum amount due every month for credit card purchases and pays EMIs on time it is seen as a positive.
• One should avoid taking too many loans as it affects the repaying capacity for new loans. So, if one intends to borrow for a business, one should try and make sure the outstanding dues for credit card are repaid. If possible, one should also prepay some or all the other personal loans. If one has other ‘unsecured’ loans and some secured loans like a housing loan, make sure the collateral-free personal loan is settled first.
• The score is also affected by loan applications. So, one should ensure they do not keep applying casually for loans as that itself is counted and signals how desperate one is to borrow.
Conclusion
Availing a business loan is a prudent way to plan for sustaining a venture or expansion. If one is looking at a collateral-free business loan of under Rs 50 lakh, the business owner’s credit score comes into play. The only way to ensure one gets the business loan is to make sure the score is high and there are multiple ways to achieve it.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.
