Impact of CIBIL Score While Applying for Business Loans

by Oxyzo Financing Smart Financing

The term CIBIL stands for Credit Information Bureau (India) Limited. It is a one of its kind company that keeps the credit information of individuals as well as businesses by taking into account multiple credit records and transactions of individuals and various commercial entities. It is the most popular of the four credit information companies as licensed by the Reserve Bank of India (RBI). Currently it has the record and has assigned scores to 600 million individuals and 32 million businesses and commercial entities.

CIBIL obtains information every month from its numerous associate partners, ranging from credit institutions to banks. Based on that information, it takes up the task of preparing a Credit Information Report (CIR) that provides a summary of the particular business or an individual in the form of a report and also in the form of a score ranging from 300 to 900. The credibility of this score is incredibly high and a good score, which is usually above 700, helps any business secure a loan that they are looking for.

In such a case, this CIBIL score becomes extremely crucial for Small and Medium scale businesses in securing a loan to continue their day-to-today functioning. This three digit credit score is a summary of a whole business and defines its creditworthiness. To understand its importance better, here are some impacts of CIBIL score while applying for Business Loans:

Quickens the process of loan procedures: In multiple cases, the CIBIL score has been the determinant factor for a person to clear a loan application. If your business has a good CIBIL score, you will face minimal challenges while getting a loan application cleared. A higher credit score denotes that the lender has trust in your capacity to repay the loan and so they wouldn’t hesitate in providing you with whatever help you require from them. With a higher score, the process of obtaining the loan gets much quicker compared to an otherwise lower score.
Getting higher loan amount on lower interest: It is the desire of all sorts of small, medium or large scale businesses to get a loan of a higher amount on a lowered interest rate. Although no business can achieve that until and unless they carry with them a CIR report with a good CIBIL score. A higher score will always get you a more positive response on your special requirements while trying to take a loan. Without that you might have to take whatever deal you are getting which can worsen your business situation.
Impacts the chances of approval: It is not uncommon to hear of loan applications getting rejected every once in a while. Rather it is more common to hear of these rejections as most money lenders do not trust small and medium scale businesses with their money. They doubt their capability to repay the loan. In such a situation, a good CIBIL score stands as a marker to define the creditworthiness of a business be it big or small. It eases down the path of getting a business loan without too much hassle or answering questions based around credibility of the company.

These are some of the ways how your CIBIL score becomes the ultimate determinant when it comes to obtaining a loan from a bank or any financial institution. CIBIL has a very good credibility since it is the most used by all business owners and has also been licensed by the RBI. For these various reasons, the score given by them is widely accepted and respected by all money lenders and financial institutions.