What is CIBIL MSME Rank

CIBIL MSME Rank (CMR) is calculated by the Credit Information Bureau India Limited. The CIBIL MSME Rank (CMR) system is used as a tool that helps financial institutions assess the credit risk associated with MSMEs. Evaluating the company’s credit history helps CIBIL assign it a score between 1 to 10. Similar to the CIBIL score used for individual borrowers, this rank is assigned to businesses and enterprises. Knowing this ranking helps you get a clear picture of your eligibility for a business loan.

It applies to MSMEs who have borrowed anywhere between ₹10 Lakhs to ₹50 Crores. This ranking is based on the credit behaviour exhibited by these MSME firms in the past. Businesses with a CMR of 1 can easily get a loan, whereas a rank of 10 makes it challenging to get approval.

To understand the meaning of CMR, you should know its parameters. These are as follows: 

1. Credit History: Records of loans and other forms of credit taken by a company in the past, where a strong credit history reflects a lower risk of default

2. Repayment Behaviour: Timeliness of previous payments, overdue amounts, and delinquency status determines payment patterns and behaviour 

3. Existing Debt: Current borrowed amount impacts CMR, where higher debt means a high risk of default

4. Type of Business and Industry: Sector in which your business functions can also influence this rank, with businesses with inherent risk getting a lower rank

5. Liquidity Profile: Well-managed liquidity boosts CMR, which is determined based on the rate of utilisation of funds and missed payments

6. Firmographics: Other factors such as your business’ maturity, industry, location, and ownership type may also have an impact

Take a look at the ratings relating to the CIBIL MSME Rank that are assigned to MSMEs in the table below:

Under the current banking system, lending to MSMEs relies on this credit rating system. Here is a list of prominent features and benefits of a CIBIL MSME rank:

• By checking CMR, you can instantly understand the creditworthiness of your MSME

• You can make informed decisions based on your MSME’s eligibility for credit

• This simplifies your borrowing approach and speeds up approval, too

• You can build and implement business and risk strategies with this rank in mind 

With a high CMR, lenders face a lower risk of default, which allows them to extend better offers. Here are some factors contributing to its significance:

• Gives eligible businesses faster access to credit

• Encourages micro, small and medium-sized businesses to borrow smartly

• Allows lenders to analyse risk better 

• Aids in creating more personalised loan terms and conditions 

• Allows borrowers to negotiate for lower terms with a good rank 

Maintaining a strong CIBIL MSME Rank can have a positive impact on your business’s borrowing capacity. This rank will help instil lender confidence and provide a way to access better lending terms. Here are some proven strategies you can adopt to maintain and improve your CIBIL MSME Rank:

• Make timely payments of all your credit obligations such as loans, credit card bills, and vendor payments

• Use calendar alerts or reminders to ensure that you never miss a payment deadline

• Maintain a healthy credit utilisation ratio and use only a portion of your available credit, while clearing your outstanding dues on time

• Pay off your credit card balances in full every month to avoid accumulating unnecessary interest charges

• Opt for a loan from a reputable lender and ensure that you repay on time to build a strong credit history

• Avoid taking on more debt than you can comfortably manage

• If you foresee any repayment challenges, make it a habit to proactively communicate with your lender

• Steer clear of loan defaults to prevent severe damage to your MSME rank

• Check your CMR report regularly to spot any errors or inconsistencies

• Dispute any inaccuracies immediately by contacting CIBIL for corrections