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Importance of CIBIL Score for Achieving Business Goals_WC

5 min 16 Mar 2023
Highlights:
  • What is the Ideal CIBIL Score Required for Business Loans?
  • How Does a Good CIBIL Score Help One Achieve their Business Goals?
  • How to Improve CIBIL Score for Business Loans?
  • How to Apply for a Business Loan with Bajaj Housing Finance?

To start and run a business, one needs cash. All your plans for your business, such as acquiring new technologies and equipment, marketing your products, hiring staff to help you put your plans into practice, etc., will require you to have uninterrupted access to cash. These days, many people opt for business loans, especially during the initial years of business. Business loans are small loans designed to cater to the needs of start-ups and small businesses. Many banks and NBFCs offer these loans. However, to be eligible for them, borrowers must meet the eligibility requirements set by lenders. These eligibility requirements consider several factors, such as the applicant’s age, experience, sources of income, CIBIL score for business loans, etc. 

The applicant’s CIBIL score is one of the key factors that decide their ability to avail of a loan as well as the terms and conditions of the loan they will be offered by a lender. The CIBIL score is a three-digit number between 300 and 900 that reflect a person’s attitude towards credit, their ability to repay credit on time and in general, their trustworthiness. TransUnion CIBIL, the most popular credit information agency in India, assigns CIBIL scores to borrowers based on the individual’s credit report. The higher a person’s CIBIL score or the closer it is to 900, the better their chances of availing of a loan on lucrative terms and conditions. Those planning to apply for a business loan against property must make sure they have the required CIBIL score for business loans. If not, they must first improve their CIBIL score and then apply for a loan.  

What is the Ideal CIBIL Score Required for Business Loans? 

Those planning to apply for a business loan must have a CIBIL score of at least 750. Such a credit score is considered excellent by lenders and borrowers who pay their EMIs on time, maintain a decent credit utilization ratio, avail of credit only when they genuinely need it and in general, have a very responsible attitude towards credit have such a CIBIL score. If your CIBIL score is below 750, you may be able to avail of a business loan, but the terms and conditions of the loan will not be favourable.  

Also Read: Tips to Maintain Your Business CIBIL Score Above 700 

How Does a Good CIBIL Score Help One Achieve their Business Goals?

If you have the required CIBIL score for business loans, you may benefit in many ways. To start with, a good CIBIL score convinces lenders of a borrower’s ability to repay the loan money on time. Thus, with a good CIBIL score, getting approved for a loan becomes easy. More and more lenders will be willing to offer you a loan, which in turn, will increase your negotiating power.  

Further, when a free CIBIL score check delivers a result of 750 or above, the lenders are also willing to offer business loans at lower rates of interest. This is crucial as a low rate of interest brings down one’s EMIs, making them more affordable. Further, it also reduces the total cost of borrowing the loan by reducing the total interest pay-out. Lastly, borrowers with an excellent credit score can bargain with lenders and request better loan terms and conditions, such as a higher loan sanction and longer repayment tenor to make repayment easy and less burdensome.  

How to Improve CIBIL Score for Business Loans?

Let us assume you do not have the required CIBIL score for business loans. What should you do then? Is it possible to improve CIBIL score? The answer is yes. A person’s CIBIL score depends on their credit history and the other things mentioned in their credit report, which change with time, and therefore, it is possible to improve CIBIL score. Here are a few tips that will help you improve CIBIL score.  

  • The first thing you must do to improve CIBIL score for business loans is to start paying EMIs and credit card bills on time. Your credit history is the factor that most affects your credit score. Therefore, it is crucial to have a clean repayment history. Never miss EMI payments and credit card bill due dates.  
  • You must also learn to be cautious about applying for new loans and credit cards. New loan and credit card applications lead to hard enquiries and too many hard enquiries cause a borrower’s CIBIL score to drop by a significant margin.  
  • Borrowers who want to improve CIBIL score must also maintain a healthy mix of secured and unsecured loans. Borrowers who maintain such a balance have a higher credit score simply because having such a mix convinces lenders and credit information bureaus of a borrower’s ability to handle all types of debt and repay it on time.  
  • Never exhaust the limit on your credit cards. Lenders and credit rating agencies see this as risky and irresponsible behaviour and therefore, borrowers who do this usually have a bad CIBIL score. Borrowers must keep their credit utilization ratio under 30%.
  • At times, borrowers’ credit scores go down due to no fault of their own. Credit rating agencies decide a borrower’s credit score based on the information provided to them by lenders and financial institutions. When lenders pass on the wrong information to credit rating agencies, a borrower’s credit score suffers. Thus, borrowers must keep doing free CIBIL score checks from time to time and if they see anything unusual, they must pull out their credit report and scan it for errors and misinformation.  

Also Read: 7 Tips to Help You Improve Your CIBIL Score 

How to Apply for a Business Loan with Bajaj Housing Finance?

Bajaj Housing Finance offers business loans against property. Under these types of loans, a borrower pledges their residential or commercial property as collateral in return for loan money. The rate of interest offered on business loans against a property by Bajaj Housing Finance is much lower than the interest rate charged by lenders on business loans. Further, the loan money comes with zero end-use restrictions. If you want to apply for a business loan against property with Bajaj Housing Finance, follow these steps:  

  • Go to Bajaj Housing Finance’s official website and open the loan against property application available on the website.
  • Enter your ‘employment type’ and ‘loan type’.
  • Enter details, such as name, address, date of birth, monthly salary, the location of the property you plan to pledge as collateral, etc. 
  • Submit the form and someone from the Bajaj Housing Finance team will connect with you to help you with your business loan against property application process.  

Business loans against property are an excellent way to raise money to set up your business. These loans offer several advantages and therefore, you must certainly consider these loans for your business needs.  

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