How To Improve Your CIBIL Score To Get A Business Loan?

Cibil score plays an important role in determining whether you get a loan. Want to know how can you improve your cibil score get a business loan? Read Now!

21 Dec,2022 10:00 IST 34
How To Improve Your CIBIL Score To Get A Business Loan?

Businesses need constant capital to invest in every aspect of their business activities and ensure operations' smooth running. However, it becomes difficult for the business owner to use personal capital to keep investing in the business, leaving them with the only option to raise external funds with flexible repayment terms. A business loan is one of the most effective credit products for business owners to raise adequate capital without lowering their control over the company. However, lenders such as banks and NBFCs have set criteria for a certain CIBIL (Credit Information Bureau India Limited) score to get a business loan.

If you are looking for a business loan but have a low CIBIL score, this blog will help you learn how to improve your CIBIL score.

What Is A CIBIL score?

A CIBIL score is a three-digit score out of 900 that reflects the creditworthiness of a person to the lender. An individual with a score closer to 900 is deemed more capable of repaying a loan than those with a lower credit score in India. TransUnion CIBIL Limited generates the CIBIL score. It manages the credit files of over 600 million individuals and 32 million businesses, assesses your credit history, and provides a score out of 900.

Since lenders take on high risk–called default risk–when they offer business loans to business owners, they prefer to offer business loans to individuals with a higher CIBIL score than 750, lowering the chances of loan default. Hence, it becomes vital to improve your credit score and take it above 750 for successful business loan approval.

How To Improve Your CIBIL Score To Get A Business Loan?

Here is how you can improve your CIBIL score to get a business loan:

• Timely Repayments:

One of the best ways to improve CIBIL score to get a business loan is by making timely repayments for all the current financial obligations such as credit card bills, electricity bills, etc. The CIBIL score will improve with every timely repayment.

• Financial Obligations:

It is important that you pay off all of your existing debt or financial obligations before applying for a new business loan. Being debt-free will ensure that you can effectively repay all the existing debt without default, increasing the CIBIL score.

• Credit Limit:

A factor in improving the CIBIL score is the utilisation of the credit limit available to you. You should ensure that you are not hitting the credit limit every month, as it depicts a negative picture in the lender’s mind that you do not earn enough.

Conclusion:

It is important to maintain a CIBIL score higher than 750 out of 900 to get your business loan approved. You can check your CIBIL score online and adopt good repayment habits to ensure a high CIBIL score to get a business loan.

FAQs:

Q.1: How much loan amount can I raise through an ideal business loan?
Ans: You can raise Rs 30 lakh maximum when you take a loan from a reputed lender.

Q.2: Is CIBIL and credit score the same?
Ans: Although there are a few differences between CIBIL and credit score, they are used interchangeably by lenders.

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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