CIBIL Score for Business Loan

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Establishing a business and running it successfully requires proper planning, hard work and risk-taking ability. Entrepreneurs also require access to substantial capital in order to expand their businesses. Often, business owners apply for a business loan to avail the required funds. Since a business loan is an unsecured loan, apart from checking the credit history of the company, lenders also check the CIBIL score of the company owner before approving the loan application.

Minimum CIBIL Score Required for a Business Loan

As mentioned above, your CIBIL score can range between 300 and 900 - the higher number being better. A credit score of 750 or above is considered good and in most cases, is sufficient to get your loan application approved. That being said, your CIBIL score is only one of the many factors that determine your eligibility for a business loan. There are several other factors such as the Corporate Credit Rating (CCR) of your company, amount of capital invested, business plan, etc that significantly influence the likelihood of approval of your business loan.

Depending upon these other factors, the bank/NBFC might agree to offer you a loan even with a lower CIBIL score. However, if your CIBIL score is less than 650, it will be extremely difficult to get a business loan for your company.

Why is CIBIL Score Important for a Business Loan

When you apply for a business loan, the lender will not only check the Corporate Credit Rating (CCR) of your business but will also evaluate your creditworthiness as an individual using your CIBIL score. This is why, being an entrepreneur, it becomes imperative to maintain a good credit standing so that you do not face any problems while applying for loans for your business.

Your CIBIL score is a three-digit number ranging between 300 and 900 that indicates your creditworthiness. CIBIL score is calculated by TransUnion CIBIL, which is the most trustworthy credit bureau in the country and is based on your credit history including your repayment record, credit utilisation ratio, number of active and closed loan accounts, etc.

How Your Credit Score Impacts Your Eligibility for a Business Loan

Your CIBIL score directly impacts the odds of approval of your business loan application. The higher your CIBIL score, the more likely it is that your business loan application would be approved. You may refer to the following table to get an idea of how the likelihood of approval of your loan application directly depends upon your CIBIL score:

CIBIL Score	Likelihood of Approval of Business Loan Application
800 or above	Very likely
750 - 800	Fairly likely
650 - 750	Can be approved depending upon other factors
Less than 650	Very unlikely

How to Improve Your CIBIL Score for a Business Loan

You can easily improve your CIBIL score by incorporating good financial habits. Given below are some of the key financial habits that you must stick to if you wish to improve your CIBIL score:

Pay Your Dues on Time:
This is the single most important financial habit to incorporate for a healthy CIBIL score. You must be punctual with regard to the repayment of loan EMIs and credit card bills.

Regularly Review Your Credit Reports:
It is advisable to keep tabs on your active and closed loan accounts and have a good understanding of your credit report. In case you notice any error or discrepancy, you must flag the same to CIBIL immediately.

Avoid Frequent Loan/Credit Card Applications:

Whenever you apply for a loan/credit card, the bank/NBFC requests your credit report and credit score from CIBIL. Such requests are known as hard enquiries and have a negative impact on your CIBIL score. It is, therefore, advisable not to apply for too many credit cards or loans within a short span of time.

(Note: If you check CIBIL score through Bajaj Markets, it counts as a soft enquiry and has no negative impact on your credit report.)

Maintain Low Credit Utilisation:

You should avoid exhausting the entire credit limit of your credit card as it reflects poor financial behaviour. Experts suggest that you should ideally not exceed 30% utilisation of your card’s credit limit.

Have a Good Mix of Secured/Unsecured Loans:
A healthy mix of both secured and unsecured loans in your credit profile shows that you have the experience of handling both types of loans and are, therefore, more creditworthy. Personal loans and credit cards are unsecured in nature, while home loans and auto loans are secured loans.

CIBIL Score: Before you apply for a new business loan, make sure that you have a healthy credit profile. Ideally, you should apply for a business loan when your CIBIL score is at least 750 or above as applying with a low CIBIL score may result in rejection of your loan application.
Have a Solid Business Plan: The success of your business, to a large extent, depends upon how well you have planned the workflow, finances and various other aspects of your business. Therefore, banks and NBFCs always thoroughly examine your business plan before granting you a business loan. Make sure you have a solid business plan to show to the bank/NBFC.

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You can check your CIBIL score on the official website of TransUnion CIBIL. You first need to register on the website and provide a few details including your PAN and date of birth. Checking your CIBIL score once a year is free, you need to opt for one of the subscription plans if you wish to check more frequently.

A CIBIL score of 750 and above (ranging from 750 to 900) is considered good for getting a business loan.

While it might be difficult to get a business loan with a low CIBIL score, if you have a solid business plan, the bank/NBFC might still approve your application even with a low CIBIL score. If you already have an existing relationship with the bank/NBFC, the chances of approval of your loan will improve further.

Yes, the CIBIL score of the business owner directly affects their eligibility to get a business loan. The higher the CIBIL score, the better the chances of approval of the loan application.

Some banks and NBFCs might offer you a business loan even without a CIBIL score if you have a solid business plan. You may also consider government schemes like Mudra Yojana to meet your working capital needs or to expand your business.