CIBIL Score For Business Loans And Why It Is Important

A business loan is useful for a businesses to meet their daily expenses and financial need. CIBIL score plays an vital role when it come to avail a loan. Read to know why cibil score is important.

18 Oct,2022 12:53 IST 18 Views
CIBIL Score For Business Loans And Why It Is Important
Once you start a business, you must consider expanding it and consistently gaining profits. Business financing is essential for the growth of any business. Nowadays, you can get funds for your business expansion through business loans easily. However, financial institutions won't lend you money without checking your business's CIBIL score. How does this score work, and why does it matter? This blog answers these questions.

What Is A CIBIL score?

The Credit Information Bureau of India Limited collects and maintains credit information about individuals and businesses in India. Acquiring credit information from banks and credit institutions generates a Credit Information Report (CIR) that reflects your entire credit history. The CIBIL score ranges from 300 to 900. Lenders consider scores above 700 ideal to qualify for loans.

Why Having A Good CIBIL Score Is Important For Your Business

1. Easier To Qualify For A Loan

Excellent business credit makes it easier for small businesses to obtain loans and lines of credit.

A lender may refuse to lend money to a business with a poor credit history because it fears it won't be able to repay the loan on time. You can likely get a loan quickly and easily if you have a good credit score.

2. Speed Up The Borrowing Process

Having a good credit score increases your chances of getting approved faster when you apply for funding for your business. Creating a credible business identity boosts your application in the eyes of lenders.

3. Better Loan Terms

If a business has a proven track record of creditworthiness, lenders will offer favourable loan terms. For example, a lender could offer a lower interest rate and an increased credit limit with a strong credit rating.

Your business can significantly benefit from better terms. For example, your business will save thousands of rupees in interest payments by lowering interest rates.

4. Protect Your Personal Finances

By using business credit, you can keep your personal and business finances separate. Your small business debts will be reported on the credit reports of your business, thereby protecting your credit rating.

Nevertheless, you should review your credit report regularly. Some lenders check your personal and business credit reports when you apply for a loan.

5. Better Terms From Suppliers

A good business credit score will make it easier for you to obtain credit terms from suppliers.

When suppliers trust that you can repay debts on time, they will be more willing to waive prepayment and let you pay on credit.

An excellent business credit score offers several benefits. Building a credit score is essential to ensure long-term success regardless of the age of your business.


Q1. How to achieve a strong business credit score?
Ans. To achieve a good business credit score:
• Pay your EMIs on time
• Reduce existing debt
• Check credit scores frequently to ensure it is error-free
• Avoid applying for multiple loans at once

Q2. What is a good business CIBIL score?
Ans. Lenders consider a CIBIL Score between 700 and 900 as good.

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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