A company credit report is a document that encompasses all of the information regarding the credit behaviour exhibited by your business in the past. Your company credit report is home to information such as the loans taken by your firm in the past, its current credit obligations, its credit utilisation ratio as well as the number of inquiries financial institutions have made about its credit history.
It is one of the first documents that the lender will access when you submit a business loan application. The lender analyses this document to assess your business’ creditworthiness and then takes a call regarding giving you any additional credit in the name of your business. This article will take you through everything you will need to know about a company credit report.
As an individual, you get a CIBIL score ranging between 300-900 on the basis of your personal credit history and loan repayment behaviour. But, a slightly different rating scale will be applied to your business by the credit bureaus. After assessing the financial health of your venture, the bureaus will assign your business a score or a rank between 1 to 10. While 1 is the best and is associated with ‘little to no default risk’, 10 is the worst and denotes a high risk of default. This scale of 1-10 is known as your CIBIL rank.
Note that a CIBIL rank will only be assigned to you if your outstanding credit dues are anywhere between ₹10 Lakhs to ₹50 Crores. The two primary variables that determine your CIBIL rank are your credit repayment behaviour and credit utilisation ratio. If you do not have a CIBIL rank, it is not necessarily a bad thing as it is possible that it could be attributable to the fact that you have very little debt in comparison.
The steps that you need to follow to get your CIBIL company credit report are as follows:
Step 1: Visit the official CIBIL web portal
Step 2: Fill out the application with the following details:
Company name and address
Your name and address
Your contact details as well as the contact details of the firm
PAN card details of the firm
Additionally, you will also be required to share some information concerning the company.
Step 3: After completing step 2, you must make a payment of ₹3,000. Once this is done, a registration ID as well as a transaction ID will be shared with you through email within minutes.
Step 4: You will now need to share your KYC documents as per the list and options you see on the following page.
Once you complete step 4, your CIBIL rank and company credit report will be delivered to you at the earliest. Note that it may take up to 15 days to receive your company credit report.
Alternatively, if you want to pay for your CCR through a demand draft (DD), you can do that too. All you must do is download the application form www.cibil.com, fill it up with the relevant data, and then mail it to the following address:
TransUnion CIBIL Limited,
19th Floor, Tower 2A and 2B, One World Centre,
841, Jupiter Textile Mill Compound, Senapati Bapat Marg,
Lower Parel, Mumbai
Maharashtra 400 013
Your CCR will typically consist of the following bits of information:
Profile: This section contains details such as the name of your company, its address, and contact details. Additionally, it also contains a unique number which has been assigned to your company by CIBIL, which is also known as the DUNS number.
Identification: These details will pertain to a copy of the report you have generated. It houses details such as the method in which it was generated, the time of its generation, and the person who generated it. This section will also contain a number which will only be unique to the report.
Types of Credit: This section contains details such as the type of credit accounts that are active in the name of your venture (such as loans and overdraft facility availed, if any) the outstanding amount(s), as well as the total available credit of your establishment. This section will be analysed by the lender to determine the credit utilisation ratio of your business.
Report Summary: As the name suggests, this section is a summation of your credit profile. This part of the CCR has information regarding the number of loans your company has taken, the outstanding debt, and the number of financing sources through which your firm has availed credit. This particular portion of the CCR will also have a mention of whether your venture has acted as a guarantor for a loan for some individual or entity.
Every business has its share of ups and downs. There may even be a time when your enterprise may find itself needing more money to survive a financially tough time or just to expand operations. If you perform a business credit health check for your enterprise periodically, you will know exactly what are your chances of securing credit from a financial institution at a time when you need it.
Regular business credit health checks also help you identify areas of improvement before it is too late and even spot any irregularities or mistakes in your CCR. If these irregularities go unchecked or areas of improvement go unnoticed, it may hamper your chances of getting a loan for your venture in the future. But, if you catch them on time, you will be able to get them rectified and potentially save yourself from a financial drought in the future. Long story short, given that money is the lifeblood of your business and there is no telling what the future of your business will be in terms of finances, keeping tabs on the financial health of your enterprise can be beneficial to you.
Some of the factors that impact the credit rating of your firm are:
Credit History Length: The longer your credit history, the better are your chances of having a good credit rating. The credit history length of your company tells the lender a story about how your enterprise treats credit. If your long credit history shows timely payments and responsible credit behaviour, your enterprise will have a favourable risk profile. If you have a favourable risk profile, a lender will happily give you credit.
Credit Utilisation Ratio: The percentage of the credit available to your firm that has been used up is referred to as a credit utilisation ratio. Finance experts say that a credit utilisation ratio of 40% or under is healthy. If your credit utilisation ratio is above that, you may still get a loan, but you may either get a smaller principal amount, a short loan repayment tenure, or a higher interest rate. Hence, we will recommend that your firm does not use up more than 40% of the credit available to it.
Repayment History: This is one of the main factors that affects the credit rating of your company. If your company has been repaying its credit card bills and loans on time, it will be very easy for your business to secure more credit. But, if your CCR has records of late/delayed payments or defaults, the lender may grow a little sceptical and reject your application for more credit.
Outstanding Debts: Another major factor that affects your credit rating is the total amount you are yet to repay. A low outstanding balance can work in your favour when your business applies for new credit and vice versa.
Age and Size of Your Company: If you have been running a business for several years and have been honouring your credit obligations, your business will be instantly viewed as a creditworthy entity. But, if you are at the helm of a startup, your credit history may not be so great owing to the fact that there is a lack of an extensive credit history and, thus, no historical data depicting your credit behaviour. The age and size of your company instantly gives the lender a sense of your firm’s income-generation capability and, consequently, its ability to pay off credit on time.
Industry: The overall outlook of the industry that your business is a part of is taken into account while ascertaining the loan repayment capability of your firm. Additionally, variables such as competition, seasonality, strengths, weaknesses, opportunities, and threats will also be considered.
You can improve your company credit report in the following ways:
Pay off business loans and corporate credit card bills on time. Additionally, partially or fully prepay the loan amount as and when possible
Maintain a low credit utilisation ratio (40% or under)
Keep the old credit cards issued to your firm handy until expiry
Improve the profitability of your firm
Check your CCR frequently and keep an eye out for any inconsistencies, misprints, or potential acts of frauds. If you find anything suspicious, report them to CIBIL or the concerned lender immediately
If you submit a business loan or a credit card application in the name of your firm, the lender will judge your creditworthiness on the basis of a few parameters. Those parameters are as follows:
The credit repayment history of your firm
Your business’ credit utilisation ratio
Your credit mix (ratio of secured to unsecured credit)
The profitability of your business
The scale and the income-generation capability of your venture
Outstanding loan/credit card debt
Age of your business and the length of its credit history
Strengths, weaknesses, opportunities, and threats of the industry that your business is a part of
The income earned by your business in the past and its projected earnings of your business
The number of sources that have already provided credit to your business
Your sources of business income generation and the degree of their stability
Ever considered quantifying your financial health in specific parameters, with the Credit Health Report on Finserv MARKETS?