What Is The Importance Of Your Business Credit Score?

What Is The Importance Of Your Business Credit Score?

Running a small business is not a task that goes with a flow. It requires a lot of effort from your side. You, as the business owner, not just require to put your blood and sweat but also ensure that all the requirements of the business are met in a timely manner.

From raw material to efficiently working machinery, a business needs a lot. And most of these requirements are only fulfilled if you have enough funds at disposal. Your business, whether big or small, requires an infusion of funds for several reasons. These reasons can be working capital, machinery purchase or upgradation, or business expansion.

To meet this fund requirement, you can use the funds from revenue. Or you can also choose to use your savings. However, if you have used up both these options or don’t wish to use them, the next best option for you is to avail a small business loan. Just like you may avail a personal loan to meet your personal requirements, you can avail a business loan to meet your business requirements.

When a borrower applies for a loan for business, the lender performs a CIBIL score check. It is an important check before sanctioning the loan application. A CIBIL or credit report depicts your financial behaviour and creditworthiness. It helps the lender to make the final decision wisely.

A CIBIL or credit report of more than 700 is considered to be ideal for getting the loan application approved without any hassle. A high score leads to getting higher loan amount being sanctioned and that too at lower interest rates. So, if you see your credit score below 700, you can immediately take up the steps to improve it.

Read on to know why it is important to have a high CIBIL score.

To Get Funds Faster

When you look forward to availing a business loan for your firm, a good credit score increases your chances of getting the loan application approved, and it helps you get access to funds faster. The higher the score is, the more credible you are in the eyes of the loan lender. Therefore, he is willing to approve your application and offer you a loan faster.

Get Higher Amount Business Loan

You may require to lease additional factory space, smoothen the cash flow, or to buy new machinery or software. No matter what the requirement is, you will require a large amount of money to fulfil the constraint. A high CIBIL score essentially represents that you are a responsible individual with funds, and so, you can be trusted with a higher loan amount. It also leads you to a position where you can negotiate on the loan offer with the lender.

To Get Benefits of Lower Interest Rates

Having a good CIBIL report for a loan makes it easier for you to get the loan facility at lower interest rates. Since the credit score is one of the important requisites while availing a loan and that it shows that you are a less risky candidate, the lenders are willing to bring down their rate of interest a bit. Similarly, you can also choose the repayment tenure as and according to your choice – the one which is in line with your business finances. You can pick the loan tenure, such as 12 months, 18 months, or 24 months. So, you can repay the loan on time and with ease, thus further boosting your credit score. Notably, paying all the bills and EMIs on time is one of the best ways to improve credit score for a business loan.

With the points mentioned above, it is quite evident that a high CIBIL score has many benefits for you, not just as a business owner but as an individual as well, as a high score is helpful in all kinds of loans. If your score is not up to the mark, you can take some essential steps, which include timely payment of all the bills and debts, correct usage of credit card and loans, not availing too many loans simultaneously, and never applying for loans at once.

Improving business credit score would require you to focus on these points for quite some time and then only your hard work will start showing in your score. So, no matter if you need a loan now or after some time, you can work towards improving your credit score now.

Also, when you apply for a business loan, you need to ensure that the lender you have zeroed in can meet all your requirements. Besides, also make sure that he offers online loan application, quick disbursal, and need minimal documentation to process the application. And before you apply for a business loan with him, ensure that you meet all his eligibility criteria and you have a good credit score to be in the position to negotiate the deal.

Author: Umesh is an experienced and knowledgeable financial advisor, ready to work with you to ensure you and your business future. He also emphasizes the need to adjust investment plans as your goals and needs change.

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