Every entrepreneur running their own firm knows the essence of a business loan - and what better factor determines whether or not they’re eligible for a loan than their CIBIL rank. CIBIL rank is a numeric summary of a company’s credit history. It ranges from 1 to 10, with 1 being the highest rank and 10 the lowest. The number is an indication of the company's past credit behaviour, derived from the information listed in the Company Credit Report (CCR). The parameters used to calculate CIBIL rank include repayment behaviour, length of credit history, outstanding debts and credit utilization, among other factors. The closer the CIBIL rank is to 1, the better are the chances of the company getting approval for a business loan. It has been observed that 70% of all the companies who were sanctioned business loans had a CIBIL rank between 1 and 4.
To check your CIBIL rank, here are the steps you need to take:
Step 1 - Complete the online CIBIL rank & Company Credit Report Request Form. You will have to provide details about your company, such as Company Name, Legal Constitution, Registered Address and Name of Applicant (Authorised to apply for and receive your CIBIL rank & CCR), among other important pieces of information.
Step 2 - Click on “Proceed To Payment”. Make payment via Credit Card or Debit Card or Cash Card or Net Banking.
Step 3 - You will receive a unique CIBIL Registration ID and Transaction ID on your email address following successful completion of your payment transaction.
Step 4 - Upload your KYC documents.
Once Step 4 is complete, your CIBIL rank and Company Credit Report will be delivered to you.
Note - If you are unable to find your CIBIL rank, there is no need to fret. CIBIL rank is only assigned to companies with current credit exposure between Rs. 10 lakhs to Rs. 10 crores.
A company credit report contains a detailed record of the company’s credit payment history, compiled from the information provided by different credit institutions. The purpose of this report is to help lending institutions make informed credit decisions - objectively as well as quickly. The contents of the company credit report will determine whether or not the business owner is eligible for a business loan.
The company credit report will help lending institutions analyse the applicant’s (company) credit worthiness by studying their repayment pattern and borrowing history. This forms the basis for the lender to release loans to entrepreneurs. The company credit report will also mention the CIBIL rank, and the closer the figure is to 1, the better leverage it gives the business owner to negotiate competitive interest rates.
Maintaining a good CIBIL rank can go a long way in simplifying one’s financial journey. If you are looking to improve your CIBIL rank for your business, here are the steps you need to take:
Timely payment of bills - Failing to pay your bills on time can negatively hurt your credit image and pull down your rank. It can create a huge dent on your records, especially if the creditor decides to report you. By ensuring that you pay your company’s bills before the due date, you are not only taking a step to improve your CIBIL rank, it will be beneficial in maintaining good relationships with creditors.
Check company credit report for errors - Often times, business owners do not pay serious attention to the information listed in their reports. What you need to know is that even the tiniest bit of error can cause serious damage to the CIBIL rank. Regularly checking your report helps ensure your report is free from all sorts of errors and inaccuracies.
Make use of company credit card - Applying for a business credit card is another quick and easy step to building your CIBIL rank, provided you don't rack up any debts and ensure to always make prompt payments. An added bonus is that business owners can get reward points, which may be cashed in for rebates or prizes. Ensure that you pay your business credit card in full and on time each month, and this will help establish your creditworthiness. If you do keep payments pending, it will hurt your rank and tarnish your credit image.
Limit credit usage - Owing too much money to banks and other financial institutions is one of the biggest factors negatively impacting your CIBIL rank. While you may need a loan or two to take the business off the ground and cover certain expenditure, it is recommended to keep any revolving debt low. Doing so will enable you to bring down your credit utilization, which, in turn will help raise your credit rating.
Refrain from making multiple applications for credit - Each time you apply for credit, the lending institution will request to go through your credit report, leaving hard credit inquiries on the report. Too many of such inquiries may indicate to other lending institutions that your business is not doing well financially, presenting you as a high risk. Additionally, hard inquiries can hurt your CIBIL rank. So, to be on the safer side, it is recommended to only apply for credit from those lenders who are highly likely to approve your application.
What role does CIBIL rank play in availing a business loan?
Every entrepreneur running their own firm knows the importance of a business loan - and what better factor determines whether or not they’re eligible for a loan than their CIBIL rank. CIBIL rank is a digit ranging from 1 to 10, with 1 being the highest rank and 10 the lowest. The number is an indication of the company's credit history, derived from the information listed in the Company Credit Report (CCR).
The closer the CIBIL rank is to 1, the better chances there is there of the company getting approval for a business loan. It has been observed that 70% of all the companies who were sanctioned business loans had a CIBIL rank between 1 and 4.
What details can be found in the company credit report?
You can find the following details in a company credit report:
How is a company credit report useful in the business loan approval process?
A Company Credit Report contains a detailed record of the company’s credit payment history, compiled from the information provided by different credit institutions. The purpose of this report is to help lending institutions make informed credit decisions - objectively as well as quickly. The contents of the company credit report will determine whether or not you are eligible for business loan. The CCR will help lending institutions analyse the organization's credit worthiness by studying their repayment pattern and borrowing history. This forms the basis for the lender to release loans to entrepreneurs. The company credit report also indicates the CIBIL rank, and the closer the digit is to 1, the better leverage it gives the company to negotiate competitive interest rates.
How to check CIBIL rank for business loan?
To check your CIBIL rank, here are the steps you need to take:
Step 1 - Complete the online CIBIL rank & Company Credit Report Request Form. You will have to provide details about your company, such as Company Name, Legal Constitution, Registered Address and Name of Applicant (AUTHORISED TO APPLY FOR AND RECEIVE YOUR CIBIL rank & CCR), among other important information.
Step 2 - Click on “Proceed To Payment”. Make payment via Credit Card or Debit Card or Cash Card or Net Banking.
Step 3 - You will receive a unique CIBIL Registration ID and Transaction ID on your email address following successful completion of your payment transaction.
Step 4 - Upload your KYC documents.
Once Step 4 is complete, your CIBIL rank and Company Credit Report will be delivered to you.
What is the ideal CIBIL rank for getting lending institutions to approve your business loan application?
There is no fixed standard on the minimum CIBIL rank to have for approval of a business loan. However, it has generally been observed that 70% of the companies who were sanctioned business loans, had a CIBIL rank between 1 and 4.
How does your CIBIL score affect your business loan application?
Many lenders do enquire about the personal CIBIL scores of business owners while determining whether or not to accept a loan application. If one runs a sole proprietorship business, the lender will consider the individual's personal CIBIL score for business loan. In case of a partnership business, the lenders may require the partners to show their CIBIL scores for business loan. For a limited company, which has its own corporate identity, the lender will usually only look at the CIBIL rank. However, this does not stop the lending institution from asking for the personal credit details of the company heads.
