Whenever you apply for a loan or a line of credit in India, you will be required to present a CIBIL score. The CIBIL score is a numeric summary of your credit score.
It is generated from factors such as repayment records and borrowing records among other things that contribute to your credit score. If you are looking for business loans on Loan Frame or even a credit card, you will need this score.
Why Get a CIBIL Score?
Finance companies, including those that serve other areas such as housing and telecommunications, will ask for your CIBIL score as long as you want to get a line of credit from them. Through the CIBIL score, they can tell a lot about your financial history. This allows them to protect themselves from non-repayment as well as provide you with the business loans that you desire.
There are many benefits to having a CIBIL score both to the lender and to the borrower. For the average SME business in India, some of the advantages include:
Eligibility and Approval of Business Loans
Loan Frame will use your CIBIL score is used to determine whether or not you are eligible for business loans in India. If your score is extremely low, then a lender will not provide you with the loan because it will be too risky for them. On the other hand, a high CIBIL score opens you up to many borrowing opportunities. Additionally, the CIBIL score determines whether or not your business loans are approved.
Business Loan Interest Rate
The score will also determine the interest rate that you will get from finance companies on Loan Frame. A high CIBIL score will give you an upper hand and raise your negotiating powers. It will allow you to get a business loan interest rate that is very low since you pose a low risk to the lender. On the other hand, a low CIBIL score might earn you a high-interest rate if your loan is approved at all. This is because your credit score is sketchy and thus finance companies have to deal with higher risk factors when offering you a loan or a line of credit.
Housing and Cell Phone Plans
SME businesses might have other needs such as office space renting and telephone services through cell phone plans. While this is not cash credit, such service providers will also require a CIBIL score from you. The purpose of the score is to help the provider gauge your ability to stick to the plan and pay on time without fail.
A general rule of thumb is that a high CIBIL score will allow you to access many services and get you a better business loan interest rate on Loan Frame. If you are looking for cash credit, it is easier to get it with a high score than with a low score. The score is a cumulative one, gathering information from different time periods. Finance companies have different thresholds when it comes to determining what a low or a high score is.
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