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Is the CIBIL Score Important for Business Loans?

By Finserv MARKETS - Dec 25,2019
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India is the third largest startup ecosystem in the world as per The National Association of Software and Services Companies (NASSCOM) . 1300 new startups were added in the tech space this year itself, taking the total number to more than 9000. These companies have created approximately 60,000 jobs directly and even more jobs indirectly, to the tune of 1.3 to 1.8 lakhs.

However, a person starting a small business in India might not always have a funding support to scale his venture, and hence requires a loan. This is where the importance of CIBIL score for business loan comes in. Confused? After all, how can your personal credit score play a pivotal role in getting you a loan for your startup? Isn’t your personal identity different from your business?

Understanding CIBIL score

CIBIL score is a summary of your credit history as mentioned in the credit history report (CIR). This is built over a period of time as you take loans or any type of credit from lenders such as banks or other financial institutions for your various needs. Your CIR does not contain any details about investments or savings across any categories such as fixed deposits, mutual funds etc.

Rather it has detailed information on overdraft facility, vehicle loan, personal loan, home loan or any other such credit that you have availed in the recent past. Your credit behaviour is reflected in your credit score available on Finserv MARKETS, which is usually a three digit number between 300 to 900. A CIBIL score of 700 and above is considered good enough to establish you as a creditworthy borrower who can be given a loan.

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Why is CIBIL score important?

Any financial institution takes a risk when it is lending money to an individual or small business. For a loan free from any collateral, this risk is even higher. A bank needs assurance that the borrower will repay the loan in time. This is where the importance of CIBIL score for business loan comes in.

Independent credit rating agencies such as Credit Information Bureau India Limited (CIBIL) play a crucial role in this process since they maintain a database of financial credit history of individuals. An individual’s CIR is a handy tool for a bank or non-banking financial institution to decide whether or not they should be approving a loan.

CIBIL score and business loan

To understand why CIBIL score affects a business loan, you need to realise that as a small business owner, your personal identity influences your business, they are not two separate things. You are a representative of your company and hence banks would want to take a close look at your personal finances and decide your creditworthiness before arriving at a decision. This is especially true if your business is still in early days, or you don’t have an existing relationship with the bank with whom you have applied for a loan to scale your business.

Another reason why CIBIL score affects a business loan, is that most often there is little or no financial information about the company to decide whether to approve or reject the loan. You might have just started your firm or be in the initial years of setting up the company, when you feel the need for additional funds. In that case your personal credit score comes in handy and lets the lenders know how much of a risk you pose to them when they trust you with their credit. A good CIBIL score lets the financial institution know that you have a degree of financial responsibility, given your past credit history and would not default on the loan being given.

business loan

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Now that you have understood the importance of CIBIL score for business loan, wouldn’t you want to know where you stand? You can easily avail a Financial Health Check Report(FHCR) on Finserv MARKETS that offers a holistic reflection of your credit health. It is more than just your CIBIL score. FHCR provides an insightful analysis along with an overview of your performance across various parameters such as repayment history, duration of credit history, utilization of credit and its type.

This information is crucial for you to become financially stable by taking investment decisions in tune with your life goals. The Financial Health Check Report on Finserv MARKETS is a reliable source for customised advice about how you can further improve your credit profile, so that you get better offers from lending institutions in the future.

Financial well being is finding the balance between caution and ambition on your journey to wealth creation and this is where FHCR acts as your guiding light. What’s more, you can also get a business loan on Finserv MARKETS upto Rs 30 lakh within minutes if your CIBIL score is good.

So whether you are a start-up, or a small and medium enterprise (SME), there is a business loan tailored for everyone on Finserv MARKETS. It cannot be stressed more, as to why CIBIL score affects a business loan, because a good credit health can get you an instant, zero collateral, customised business loan on Finserv MARKETS.

Finserv MARKETS, a subsidiary of Bajaj Finserv, is a one-stop digital marketplace that has been created for consumers on the go. It offers 500+ financial and lifestyle products, all at one place. At Finserv MARKETS, we understand that every individual is different. And that’s why we have invested in creating a proposition – Offers You Value. A value proposition that ensures you get offers which are tailor made for you. We also offer an amazing product range and unique set of online offers across Loans, Insurance, Investment, Payments and an exclusive EMI store. Be it in helping you achieve your financial life goals or offering you the latest gadgets, we strive to offer what you are looking for. From simple and fast loan application processes to seamless and hassle-free claim-settlements, from no cost EMIs to 4 hours product delivery, we work towards fulfilling all your personal and financial needs. What’s more! Now enjoy the same benefits in just one click with our Finserv MARKETS App.

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Bajaj Finserv Direct Limited ("BFDL"), erstwhile Bajaj Financial Holdings Limited is a registered corporate agent of Bajaj Allianz Life Insurance Company Limited and Bajaj Allianz General Insurance Company Limited under the IRDAI composite registration number CA0551 valid till 10-Apr-2021. BFDL also renders services to Bajaj Finance Limited (‘BFL’) and Bajaj Housing Finance Limited (‘BHFL’) (referred hereinafter as ‘Lending Partner’) in sourcing of customers, providing preliminary credit support activities, fulfilment services and post-acquisition customer services related to lending business. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522