What Is The Optimum CIBIL Score Required For A Business Loan?

A certain minimum or ideal CIBIL score is necessary in order to avail business loan. Get to know how much cibil score is required for your loan here!

5 Jan,2023 10:13 IST 1892 Views
What Is The Optimum CIBIL Score Required For A Business Loan?

A CIBIL score checks your repayment capabilities and determines whether you qualify for a loan or not. Based on the score, banks and NBFCs state the terms and rates for your loan. This article highlights the optimum CIBIL score required for a business loan.

What Is A CIBIL Score?

A CIBIL score is a three-digit number derived from the credit history and delivers a report. The score denotes your capacity and repayment intent by examining your credit history. The higher your CIBIL score, the better your chance to qualify for the loan with a favourable term.

Typically, you may consider yourself an entity different from your business. However, lenders do not follow the same principle, especially if you are a small business owner. They evaluate your credit score before approving a loan, even if it differs from a business credit score.

What Is The Optimum CIBIL Score Required For A Business Loan?

CIBIL score ranges from 300-900 in India. Additionally, business loan application procedures can be rigorous for companies with lower scores. The following scores suggest the optimal level for securing a loan for your business:

A Score Above 750:

A CIBIL score of 750+ means you not only qualify for the loan but also get a fair share of negotiating power. You can keep a lower interest rate expectation and an assured longer tenor for the repayment of the principal amount.

A Score Between 650 And 749:

A credit score in this range is good but eliminates the scope of bargaining for a lower interest rate, especially as you reach the 650 mark. It is easier to obtain a loan with a score above 700. If you fall below that score and do not need to take a loan, it is advisable to improve your CIBIL score before applying.

A Score Below 650:

A score below 650 is not the best and is considered poor by financial institutions. A few lenders have criteria that the minimum CIBIL score should be above 650 to apply for a loan.

How To Improve CIBIL Score?

Inculcating good financial habits is the key to improving your CIBIL score. Some of the best financial practices to improve your CIBIL score includes:
  • Pay your dues on time.
  • Avoid frequent loans and credit card applications.
  • Avoid exhausting your entire credit limit. You should ideally utilize only up to 30% of your card’s credit limit.
  • Check on your credit reports regularly.

Frequently Asked Questions

Q.1: What are the factors affecting a CIBIL score?
Ans: There are a few factors that affect your CIBIL score, including payment history, credit mix, loan inquiries, and credit utilization.

Q.2: Does your CIBIL score matter during the application for a business loan?
Ans: Yes. Your CIBIL score is subject to scrutiny while applying for a business loan, especially if you are a small business owner.

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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