Role Of Credit Scores In Quick Business Loan Approval

Role of Credit Scores in Quick Business Loan Approval
  • Mar 07, 2024

Business loans in India aren’t an uncommon affair. They are such an integral part of the Indian economy that 22% of business loans approved in FY 2023 are worth more than INR 500,000!

Nevertheless, Non-Banking Financial Corporations (NBFCs) and lending institutions reject business loan requests just because of insufficient credit scores. To avoid being denied the necessary funds you need to level up your business, you must know how credit scores impact your business’ credibility. Let’s dive right in!

Business Loan Services and Their Need for Credit Scores

Your business’ credit score is a crucial factor in business loan applications. But business owners oftentimes get discouraged just because of the lengthy and typical procedure that goes into financing themselves through business loan services. So where does your credit score take your business? How much monetary benefit can it bring you? Read along to find out!

  • CIBIL Score of 650 and Below

650 is usually considered the average CIBIL score that you need to maintain to be considered for a business loan. However, it isn’t a great score per se and does not necessarily make you eligible for business loan services. In case your venture fulfills some other sort of requirement, that might cover your credit score liability, then you might be able to secure a business loan approval.

  • CIBIL Score 700

If you hold a credit score equal to 700, then congratulations! You are in the safe zone in terms of credit score for business loans. Most NBFCs and landing institutions seek 700 as their credit standard for determining a business as a trustworthy borrower. 

  • CIBIL Score Above 700

For any kind of business loan, the CIBIL score is a major factor to be considered. CIBIL score above 700 is ideal for quick business loan approvals. It improves your chances of receiving quick approvals at low interest rates. However, you must remember that a credit score isn’t the only standard for good loan deals.

5 Factors That Build Your Business’ Credit Score

The credit score of your business is the primary deciding factor as to whether it is a safe borrower for the bank or not. But what troubles the loan seekers is the question, ‘What does the business’ credit score depend upon?’ Let’s delve deeper into the factors that in layman’s terms influence your trustworthiness in front of the bank.

  • Previous Payments

While availing of business loan services, your previous payment record is one of the most peculiar components that determine your credibility as a borrower. Ideally, your prior payment records must be in pristine condition and free of any slip-ups. Missing out on a payment or two that goes on your record can drastically reduce your credit score, and hence your business’ reliability.

  • Balanced Credit Usage

Maintaining your credit score for business loan approvals is one thing but balancing the credit usage is another, more typical task. To balance your credit usage, you must streamline your credit expenses such as vendor credit, business credit card, equipment lease, etc. Once you have all these aspects streamlined, you’re all set on your path to successful loan approval.

  • Credit Age

The time you have been using credits or loans and the number of your accounts is also a vital dependency on your credit score. In case your business has a low credit score or the number of related accounts is less, it is considered an inactive user. Consequently, finding business loan services compatible with your business becomes difficult.

  • Personal Credit Score

You might be surprised to know this but your credit score, as the sole or part owner of a business, affects your venture’s ability to gain loans. Especially in the case of small businesses, as they have minimal to no credit history, the owner’s credit history is considered the go-to for the business loan. 

  • Business Details

Beyond the army of credit-based aspects, there is another silent player in the loan approval game, business details. You must always understand and respond to the lender’s requested information with utmost accuracy. It might be shocking for you, but many loan applications are discarded just because of inaccurate or missing information.

Your Path to Quick Loan Approvals

Maintaining a good credit score is no doubt one of the most important factors for quick loan approvals, in both personal and business loan services. It is necessary for not just sustain your credit score but your business as well if you are seeking a business loan. Moreover, it is also equally important to balance all other factors mentioned in the article above so you face a smooth journey in the loan approval process.

Unified Capital and Investments brings you a team of seasoned financial advisors and professionals who are all set to ease your road to boosting your business.

Work With Unified Capital And Investments

Unified Capital and Investments brings you a diverse array of business financial services, all of which are presented in a way that ensures your utmost satisfaction. Our experts don’t just contribute towards affordable solutions, but also comfortable solutions.

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