Does CIBIL Score affect your eligibility criteria for business loans?

It is an undeniable truth that the chances of getting business loans, especially unsecured business loans sanctioned are directly dependent on the credit score of the individual. Therefore, it can be inferred with absolute certitude that having low credit score significantly affects your chances of getting a business loan. This effect also proliferates significantly if the type of loan that is applied for is a fast unsecured business loan.

We need to understand that unsecured business loan is a type of loan that does not require any collateral to be attached. This is one of the main reasons why most-small scale and medium scale businesses opt for such a loan. By not having to attach security it saves them from a huge burden. That being said, the risk of loan default is perceived to be high by the lender and to reduce this risk, certain eligibility criteria will be looked into, including your CIBIL score.

What is considered as a good/ bad CIBIL score?

Credit history or CIBIL score depends on the borrower’s repayment graphs. Since, unsecured business loans do not demand an asset as a guarantee, the CIBIL score is the primary factor considered.

The scale ranges between 300 and 900. Where 300 is considered as low it may also affect the loan approval process and the loan amount granted. On the other hand, 900 is considered as high and helps in getting loans sanctioned effortlessly.

The general requirements for receiving unsecured loans are as follows:

  1. Business Plans: The SME business loan are easily granted to small and medium enterprises that have a comprehensive business plan and a detailed direction about the course of actions that will be followed in the future. This instills a feeling of confidence in the minds of the officials that the business is taken very seriously by the entrepreneurs and the business has the potential to grow.
  2. Project Reports: The project report comprehensively contains the ways in which the resources will be used by the team including the financial support that is being granted to the business.
  3. Financial History: The financial history is of immense importance to the authorities who are willing to grant the loan and that is because it directly depicts the sort of financial establishments the business is presently having and also the sort of differences that may be expected in the future. This includes GST certificate, Income Tax Returns, Financial statements.
  4. Transactions History: The transactional history is also of immense importance and if major transactions are made in the history of the company, chances are that the loans will also be easily granted.
  5. Business Potential: Business potential is evaluated by the officials in several ways. The potential of the industry and the business is one of the prime determinants when it comes to getting the loan sanctioned.
  6. Credit History of the Borrower: The credit history of the individual borrower is the foremost factor in the case of an unsecured business loan. Primarily because the loan does not demand to submit any assets or collaterals as a security, the prime guarantee, in this case, is the CIBIL score of the borrower.

Without a good credit history, it is almost impossible to receive an unsecured loan. Reviewing and improving your CIBIL score regularly can help maintain a consistently good score and makes you an ideal candidate for an unsecured business loan with no complications.

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Does CIBIL Score affect your eligibility criteria for business loans?