There is no fixed answer to this, as business loan is a vast category that consists of various types of credit facilities and loan products. The minimum CIBIL score required shall depend upon several factors, such as business and loan type, collateral required or not, loan amount, etc. There are few types of business loans wherein no CIBIL score is checked by the lending banks and NBFCs, such as Overdraft (OD), small business loans, micro loans and Mudra loans under the Pradhan Mantri Mudra Yojana (PMMY). However, to avail any type of business loan you must maintain a good CIBIL score of 700 or above. Do not worry if you have a low CIBIL score of 650 or below as there are various financial institutions that offer business loans without checking CIBIL score. The only criteria is that the offered loan amount may not be high, but the interest rates shall also be comparatively higher.
Why is CIBIL score important for a Business Loan?
CIBIL score, being a 3-digit numeric defines your creditworthiness and past credit behaviour. Before any type of business or MSME loan sanctioning, most of the lenders request the concerned credit bureau for your credit report to check and verify your past payment history. Higher your CIBIL score, more are the chances of loan approval. Besides unsecured business loans, many other products are secured and are backed by collateral/security. To avail unsecured business loans, you need to maintain a high CIBIL score as banks might approve your loan based on your CIBIL score.
Company Credit Report and CIBIL Rank for Business Loan
Your Company Credit Report (CCR) and CIBIL rank both are equally important for your business loan approval. Your CIBIL Rank and Company Credit Report is an indication of your business/MSME loan eligibility. Monitor your Company Credit Report and CIBIL rank regularly, as lenders do check it before loan approval. CIBIL rank is a numeric scale from 1-10 that summarizes your Company Credit Report, wherein Rank 1 is considered as best followed by numbers until 10 being the worst, signifying a company at default or near bankruptcy. TransUnion CIBIL offers various subscription plans to get your Company Credit Report on a monthly, half-yearly and annual basis.
Note: CIBIL Rank is accessible for companies or businesses with current credit exposure of up to Rs. 50 crores.
How to improve your business’ credit health and CIBIL rank?
Following are the ways for businesses to improve your credit health, as well as CIBIL rank:
- Monitor your Company Credit Report regularly and report for mistakes
- Pay-off all your business’ bills in time
- Avail short-term unsecured loan to repay existing EMIs
- Do not close your old business accounts or business credit cards
- Maintain your business debt to the minimum level
- Avoid applying for multiple credit products at the same time
CIBIL Score vs. CIBIL Rank
Below discussed is the tabular representation of the basis differences between the CIBIL score and CIBIL rank. Although these two terms sound a bit similar, they are different in nature.
CIBIL Score | CIBIL Rank |
CIBIL score is calculated and generated for individual consumers | CIBIL rank is calculated and generated for companies, enterprises, organizations, etc. |
CIBIL score is a 3-digit numeric that depicts the creditworthiness and past payment history of the applicant | CIBIL rank is a numeric ranges from 1-10 that summarizes your company’s credit report |
CIBIL score ranges from 300-900, wherein score close to 900 is considered good | CIBIL rank of 1 is considered best with minimum risk of defaults and Rank 10 is worst with maximum risk for the bank in offering funds |
CIBIL score check is free of cost | Getting your company’s CIBIL rank is paid |
Note: The basic eligibility criteria and minimum CIBIL score required shall vary from lender to lender. Therefore, it is highly recommended to check the minimum CIBIL score required for a business loan with the respective lender.
Last words:
The minimum CIBIL score criteria for a business loan is defined by the lender and shall vary from bank to bank. Businesses with minimum risk for lenders and high creditworthiness are more close to loan approvals. Lower CIBIL score could lead to loan application rejections and challenges in the loan approval process. Maintain a good CIBIL score to secure a business loan at competitive interest rates, along with additional lending benefits. To improve the chances of loan approval, it is recommended to maintain a strong credit history, as well as a good CIBIL score.
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