How individual credit score impact your company business loan |
Posted: January 5, 2017 |
A business loan is a loan that you take out to meet the requirements of your business. It can be for the purpose of starting a business, running its daily operations or even for expansion purposes. One can avail various kinds of business loans in the Indian market, such as start-up loans, working capital loans, acquisition loans etc. The demand for loan products is high and not easy to get. Banks and other financial institutions will look at a variety of things before deciding whether to extend you the credit. They will evaluate how much risk your business poses, take into consideration your credit history and look into the amount of debt your company is in, among a number of other things.
The impact of personal CIBIL rating on business loans is the same as with other kinds of loans. Financial institutions will take into consideration the credit scores to determine the risk of the business. The CIBIL rating gives financial institutions an idea about whether you, as a business owner, will be able to repay back the loan amount on time. A poor CIBIL rating indicates that you pose high risk, and so banks and other financial institutions may be hesitant to get into an agreement with you. But if they do extend loan for bad credit, chances are the terms and conditions will be extremely stringent, and that is one of the reasons for high business loan interest rate in India.
As a business owner, you must always aim to maintain a CIBIL rating of at least 750 at all times. Most banks and other lending institutions are usually only willing to accept applicants with a CIBIL rating of 750. The closer your score is to 900 the better chances you will have in getting your loan application approved. Having a good CIBIL rating will also fetch your lower business loan interest rate in India, as financial institutions will consider you less risky. First time entrepreneurs with no previous business credit history have to especially work hard in establishing a good CIBIL rating. For a new business owner, lenders have no way to determining their creditworthiness and so they will take into consideration their personal CIBIL rating.
If you have a poor or a bad score, it does not mean that all doors are closed. You will find a few lending institutions willing to provide you with the required loan amount. However, they are likely to charge you high business loan interest rate in India as a way to minimize their risk. So if you are looking out for personal loan for low cibil score, be prepared to shell out more money in business loan interest rate in India. The loan tenure for business loans bad credit is also likely to be short. Since the terms and conditions of business loans bad credit tend to be stringent, it is important to consider other financing options as well.
You could consider borrowing from your family or friends, crowd funding, angel investors, venture capitalists etc. It is important to weigh the pros and cons of different financing options as each of them is unique and have their own features. For instance, a venture capitalist will want to hold a certain percentage of your business in return for the capital that they provide. They may not be affected by your poor credit score as they will have a say in your business and can help make it a success. Your friends or family members are also not likely to be put off by your weak credit score and may be willing to lend you the required sum to help you succeed. But here the risk is that if your business were not to take off, you could risk possibly ruining your relationship. So when you are considering options other than business loans bad credit, weigh the advantages and disadvantages and then take a decision accordingly.
The best solution is to getting access to competitive business loan interest rate in India is to first work on your credit score. In order to build up your CIBIL score, ensure that you make all of your repayments on time. Honouring your dues can help establish your creditworthiness, making it easy to avail a loan of your choice as well as getting low business loan interest rate in India. Your credit score plays a major role in your life, and as seen above it can determine whether you get a loan to run your own business. A poor score can result in you having to choose business loans bad credit, where the terms and conditions will be stringent. So to ensure that your journey is smooth, it is recommended that you first work on your creditworthiness before sending out loan applications to financial institutions for your business.
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