What is the minimum CIBIL score required for a Business Loan?
15 November, 2023
Business Loans for MSMEs are becoming a significant driver of economic growth in India. These loans can be used to fund various business needs, such as expansion, hiring, inventory purchases and marketing.
However, to qualify for these loans, you must meet certain eligibility criteria, including a good credit score. In this article, we will discuss the minimum credit score for Business Loans and tips on improving your creditworthiness to increase your chances of obtaining a loan.
Minimum credit score for Business Loan
To determine your creditworthiness, lenders may perform one or two types of credit checks: credit score for individuals and credit rank for businesses.
For Business Loans, the minimum credit score required by most banks and NBFCs is around 700. A credit score ranges from 300 to 900, and a score of less than 650 is considered average and may lead to the rejection of a Business Loan.
A low credit score may also result in more rigorous eligibility requirements and higher interest rates. However, some lenders may still offer Business Loan for low credit scores by charging higher interest rates due to the risk involved with the profile.
Business Loan for MSMEs are designed for micro, small and medium enterprises to help them finance their ongoing operations or expand their business. The credit score for this type of loan is also based on your credit history and financial stability. The minimum credit score for Business loans is generally around 700. However, some lenders may be more flexible with the minimum credit score requirement for small-scale businesses.
Company credit report
A company credit report is an assessment of a company's creditworthiness, similar to how a credit score indicates an individual's creditworthiness. The report is based on data gathered from banks and other NBFCs and is used to evaluate a company's financial standing.
The report also includes a credit rank or commercial credit score (CCR), which ranges from 1 to 10, with 1 representing the highest attainable rank. Businesses with credit exposure between ₹10 lakhs and ₹10 crores can get this rank. The closer a company's credit rank is to 1, the higher its chances of obtaining a commercial loan with the best possible offer.
Business Loan application and approval
To apply for a Business Loan, you must submit an application online or in-person to the lender. The lender will then evaluate the application and check your credit score, business plan, financial statements, and other relevant information to approve the loan. If the application is approved, the lender will disburse the loan amount directly to your bank account.
Business Loans can increase operating capital, purchase inventory or equipment, engage new employees, or pay legal fees to market the services.
Many lenders offer the option to apply for a Business Loan online, making it easier and more convenient for you to access financial assistance. Online application processes are typically faster, require less documentation, and offer more transparency throughout the loan approval process. However, you should still be cautious when applying for a loan online and only use reputable lenders with secure online systems.
Tips for improving your creditworthiness
Improving your creditworthiness can increase your chances of obtaining a Business Loan . Here are some tips for improving your credit score:
Timely payments: Make all payments on time and do not delay paying off debts.
Avoid multiple lenders: Avoid applying for a loan from multiple lenders, as this can negatively impact your credit score.
Proper term: Choose a proper credit term to manage your payments and lower your chance of defaulting on them.
Good balance of secured and unsecured loans: Maintain a healthy balance of secured and unsecured loans to demonstrate your creditworthiness.
Understanding credit scores and taking steps to improve them can make the loan application and approval process smoother and increase the chances of obtaining financial assistance. You should do your research and choose reputable lenders to ensure a successful loan application.
A good credit score is essential for obtaining a Business Loan in India. You should aim for a minimum credit score of 700 and above to increase your chances of loan approval. Lenders may also consider your credit rank or commercial credit score for businesses. It is important to adopt responsible credit practices and find the best lender to suit your needs.
You should avoid applying for loans from multiple lenders, choose a proper credit term, and maintain a healthy balance of secured and unsecured loans. These practices will help improve your creditworthiness.
Business Loans are vital for business growth in India. HDFC Bank Business Loan is an ideal product for businesses that have been operating for at least 3 to 4 years. With loan amounts of up to ₹75 lakhs, HDFC Bank Business Loans can help businesses finance various operations such as expansion, hiring or purchasing inventory. Apply Now.
*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. XXX Loan at the sole discretion of HDFC Bank Limited. Loan disbursal is subject to documentation and verification as per Bank's requirement. Interest rates are subject to change. Please check with your RM or closest bank branch for current interest rates.
