Importance of a CIBIL Score When Availing of a Business Loan

Starting and running a business requires finance, whether it is for acquiring new technologies and equipment, marketing your products, hiring staff to help you put your plans into practice and so on. Many entrepreneurs avail of business loans, especially in the early stages of their ventures.  

Business loans are designed to cater to the needs of start-ups and small businesses. Many banks and NBFCs offer these loans. However, to be eligible for them, borrowers must meet the eligibility requirements set by lenders. These eligibility requirements consider several factors, such as the applicant’s age, employment type, income, and CIBIL score for business loans.   

What is a CIBIL Score? 

The applicant’s CIBIL score is one of the key factors that decide their ability to avail of a loan as well as the terms and conditions of the loan they will be offered by a lender. The CIBIL score is a three-digit number between 300 and 900 that reflects a person’s attitude towards credit, their ability to repay credit on time and in general, their trustworthiness. TransUnion CIBIL, the most popular credit information agency in India, assigns CIBIL scores to borrowers based on the individual’s credit report.  

The higher a person’s CIBIL score or the closer it is to 900, the better their chances of availing of a loan on lucrative terms and conditions. Those planning to apply for a business loan against property must make sure they have the required CIBIL score for business loans. If not, they must first improve their CIBIL score and then apply for a loan.   

Benefits of Having a Good CIBIL Score for a Business Loan

Having a high CIBIL score when applying for a business loan. It reflects the borrower’s creditworthiness and repayment history, helping lenders assess the loan application better. Here are some of the benefits 

• Improved Loan Approval Chances: A higher CIBIL score increases the likelihood of loan approval, ensuring you meet lender criteria with ease. Lenders view individuals with higher scores as reliable borrowers who are more likely to repay on time, making it easier to access funding. 
• Better Loan Terms and Lower Interest Rates: A good CIBIL score not only facilitates quicker approval but also enables borrowers to secure loans with better terms. This includes lower interest rates, which reduce the overall cost of borrowing.  
• Access to Higher Loan Amounts: With a higher CIBIL score, you may qualify for a larger loan amount, allowing you to meet your business needs more effectively. This is especially important for scaling your operations or investing in growth opportunities. 

What is the Minimum CIBIL Score Required for Business Loans? 

Those planning to apply for a business loan should ideally have a CIBIL score of at least 750. Borrowers who manage their credit diligently have such a CIBIL score. If your CIBIL score is below 750, you may be able to avail of a business loan, but the terms and conditions of the loan may not be favourable.   

Also Read: Tips to Maintain Your Business CIBIL Score Above 700 

How Does a Good CIBIL Score Help One Achieve Their Business Goals?

If you have the required CIBIL score for business loans, you may benefit in many ways. To start with, a good CIBIL score convinces lenders of a borrower’s ability to repay the loan on time. Thus, with a good CIBIL score, getting approved for a loan can become easy. A high CIBIL score can increase your chances of getting business loans at lower interest rates, making EMIs more feasible and reducing the total cost of borrowing. Additionally, individuals with excellent credit scores can negotiate better loan terms, including a higher loan amount and longer repayment period.

How to Improve CIBIL Score for Business Loans?

A person’s CIBIL score depends on their credit history, credit mix, and utilisation ratio, among other parameters mentioned in their credit report. Here are a few tips that can help you improve your CIBIL score:

• Your credit history plays a significant role in determining your CIBIL score, so maintaining a clean repayment record is essential. Always aim to pay your EMIs and credit card bills on time to avoid any negative impact on your credit score.
• It is important to be selective when applying for new loans or credit cards. Frequent applications result in hard enquiries, which can cause your CIBIL score to drop. Applying only when necessary helps maintain a healthier credit score.
• Borrowers who want to improve their CIBIL score should maintain a healthy mix of secured and unsecured loans. Having such a mix can convince lenders and credit information bureaus of a borrower’s ability to handle all types of debt and repay it on time.
• Never exhaust the limit on your credit cards. Keep your credit utilisation ratio under 30%.
• Keep checking your CIBIL score and report inaccuracies and flag them immediately.

How to Apply for a Business Loan with Bajaj Housing Finance?

Bajaj Housing Finance offers Loans Against Property for business expansion at competitive interest rates and long repayment tenors. Here, a borrower needs to pledge their residential or commercial property as a collateral to secure substantial funds. To apply for it online, follow these steps:

1. Access the Loan Against Property application form.
2. Select your employment and loan type.
3. Enter all the required details, such as name, address, date of birth, monthly salary, and the location of the property you plan to pledge as a collateral. 
4. Submit the form.

After submission, a representative from Bajaj Housing Finance will connect with you to guide you further.

Conclusion

A good CIBIL score is essential for securing favourable business loans. It increases your chances of approval, provides better loan terms, and lowers interest rates. Maintaining a strong credit history, managing credit wisely, and regularly monitoring your CIBIL score can help you access the funding needed to grow your business.