What Is A Good CIBIL Score For SME Finance?

09 Jan 2023
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What is the CIBIL score?

CIBIL score is a 3-digit number that plays a significant role in deciding the likeliness of your loan application receiving approval or facing rejection. It helps lenders assess your creditworthiness. And hence, your lender looks into your CIBIL score to justify your ability for loan repayment.

This number, the CIBIL score, uses the credit history as per your CIBIL report. And this CIBIL report is a record of any individual or business’s financial history. Data from various banks and other financial institutions put together as a record make up your CIBIL record.

The CIBIL record takes into account all your past and current credit inquiries, your credit accounts (both open and closed), personal and employment information and payment history.

In India, there are several reliable bureaus keeping credit records of individuals and businesses like, TransUnion CIBIL, CRIF Highmark, Equifax, etc. The score they provide may range somewhere between 300 and 900. Several parameters are evaluated to arrive at the final score. Some of these parameters are your past track record of credits utilized and repaid, credit utilization ratio and also your most recent repayment behaviour. The score provided by TransUnion CIBIL is known as CIBIL score.

Higher your CIBIL score, hassle-free can be your business loan approvals and disbursements.

Is your CIBIL score the same as that of your business?

Not necessarily. All financial institutions consider you and your business as two separate entities. Therefore, it is very much likely that your CIBIL score can be different from the score of your business. This becomes particularly significant in the case of small companies. So, if you are looking forward to applying for finance for SME, both you and your business need to have good CIBIL scores.

However, if you are looking for SME credit for a proprietor-owned company, your personal credit score may equate with that of your business’s score. And the same may stand true in some other cases where partnership businesses can have an equivalent score as that of partners as individuals.

What is an ideal CIBIL score?

The higher the CIBIL score, the higher the probability of securing SME credit. A higher CIBIL score can also mean that you or your business may stand eligible for SME unsecured loans which are really difficult to secure without a good credit score.

CIBIL score is an important deciding factor on whether your business is eligible for SME credit or not. It summarises your financial history and your past repayment history and predicts the probability of you handling the received finance for SMEs in future. A good credit score allows you to bolster your business quickly. Not only it makes you eligible for SME credit but also may help you badge collateral-free or SME unsecured loans. In addition, an ideal credit score can be favourable for your business. With a score near 900, not only you are likely to receive the funds, but also it empowers you to negotiate the terms such as a longer tenure and a lower interest rate.

Any score between 750 and 900 is generally taken as an ideal score making your business eligible for SME credit. A high score indicates your diligence and financial management capacities in managing your business. A higher score also lends you eligibility to negotiate favourable terms for the loan. And you can definitely procure flexible finance for SMEs from banks and other Non-Banking Financial Companies (NBFCs) such as Oxyzo Financial Services Pvt. Ltd. Oxyzo offers smart finance for SMEs and even SME unsecured loans with customized SME credit solutions. Such help can help you transform your business and make the best utilization of funds, as and when required.

Even if you have had a bad financial time with your previous loans, you can still apply for SME credit if your score ranges between 650 to 749. Although it may not put you in a good position to negotiate, however, you may still get the credit. You can utilize this as an opportunity to improve your credit history and of course, your or your business’s CIBIL score. This can empower you in getting flexible finance for SMEs in your future ventures. An improvement never goes unrecognized. It is also an ideal opportunity to become eligible for SME unsecured loans.

Credit scores less than 650 are not so well. They can be regarded as average, fair or even poor. If you want to get your loan application approved, you can utilize this opportunity to improve your credit score and creditworthiness. If you are in urgent need of funds with an average or fair credit score, it may be better to apply for a secured loan. Remember, each opportunity is a chance and can lead you to the path of improvement. And you can therefore utilize this necessity as an opportunity.

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