CIBIL Score for Business Loan

When you apply for a business loan, the lender evaluates your repayment capability through your CIBIL score. Thus, the score directly impacts the chances of your loan application being approved. The higher your score, the more likely it is that your loan application will be approved.

 

Refer to the following table to understand how your CIBIL score affects your loan eligibility:

Thus, having a score of 750 or more is ideal for securing a business loan at favourable terms.

In case of emergencies and sudden expenses, here are some tips that can help enhance your business loan despite a low CIBIL score: 

• Have a Stable Income

Ensure that you have a stable source of earnings and submit your income proof. This assures the lender that you have enough earnings to comfortably repay your loan. 

• Provide Collateral

Consider submitting your asset to the lender as collateral. These can include property, gold, and other assets allowed by the lender. This helps reduce the risk associated with the business loan for the lender. It improves your eligibility, enabling you to get a loan at favourable terms.

• Get a Co-applicant

Having a co-signer or guarantor can help improve your business loan eligibility. This is because the co-applicant’s credit score and income are also considered. They also share the responsibility of loan repayment. So, if your co-signer has a good CIBIL score and stable income, the lender may approve your loan. Additionally, you may also be able to get more favourable loan terms. 

• Pay Off Debts

Try paying off your existing loans and credit card dues. This can help reduce your debt-to-income (DTI) ratio. This ratio is another factor considered by lenders when determining your eligibility. It can also help improve your CIBIL score. Having a DTI ratio of less than 35% is considered ideal. 

• Opt for a Lower Loan Amount

The eligibility criteria for a lower loan amount may be more lenient. This is because a lower amount poses limited risk to the lender. It can help improve your chances of getting the business loan, even if you do not have a good CIBIL score. 

 

While these tips can help you get a business loan, the terms may not be as ideal. Also, getting a loan in the future may not be easy without a good CIBIL score. Here are some ways in which you can build your score:

• Pay the loan instalments and credit card bills on time

• Do not use more than 30% of the credit available to you

• Avoid multiple credit card and loan applications at the same time 

• Check your credit report regularly for errors

• Maintain a healthy credit mix of secured and unsecured forms of credit