Introduction
In today’s financial world, credit scores and credit reports are crucial for individuals as well as MSME businesses. Just like a good credit score is required for an individual, a business also needs to have a healthy credit score to get loans, credit facilities, or favorable terms from banks and lenders. That is where the CIBIL Commercial Report comes into play. It indicates to banks and financial institutions how reliable and creditworthy a business is to lend a collateral-free business loan.
What Is a CIBIL Commercial Report?
It is a detailed report issued by one of the leading credit information companies TransUnion CIBIL in India, regarding a company or business entity’s financial behavior. In individuals, there exists a credit score called CIBIL score while for businesses it exists as a credit rating reflected through a Commercial Report.
What this Commercial Report (CCR) consists of:
- Business Information: General information including the name of the company, address, registration information, and type of business.
- CIBIL Rank: A score between 1 and 10 gives an idea of the creditworthiness of the business. A lower rank indicates better credit reliability as it is closer to 1.
- Credit History: Details regarding loans, credit cards, and repayment history.
- Outstanding Dues: Details regarding unpaid loans or delayed payments.
- Credit Inquiries: This shows the number of times the business has applied for loans or credit facilities.
This report allows the lender to know the health of the business before lending them any credit or loan.
What Affects the CIBIL Commercial Report?
There are various factors that affect the CIBIL Commercial Report. These factors need to be managed by the business owner for the best possible credit rating:
1. Repayment History
Pay loans and credit card dues on time. The report is damaged if your business often delays paying or defaults.
2. Credit Utilization Ratio
This is a percentage of the credit amount you are using against the overall credit limit that is available for your business. A high usage ratio is an indicator of strain on your finances, thereby reducing your CIBIL rank. Businesses should preferably use less than 30-40% of their credit limit.
3. Credit Mix
The type of credit a business has—secured loans (like property or equipment loans) and unsecured loans (like working capital loans)—affects the report. A healthy balance between the two types is better for creditworthiness.
4. Company Size and Age
Older and well-established companies often have better credit ratings because they have a proven financial history. New businesses may initially face challenges in building a good CIBIL rank.
5. Credit Inquiries Number
Each time a business applies for a loan or other credit facility, the bank goes through the CIBIL Commercial Report. Too many inquiries on account within a short span are against the report as that creates suspicion of financial instability or despair due to funds deficiency.
6. Overdue
If a business has many loans and high unpaid amounts, it reflects poorly on the report. Paying off debts on time is important to maintain a good credit rating.
7. Legal and Tax Issues
Any pending lawsuits, tax defaults, or other legal complications can badly hurt the CIBIL Commercial Report. Maintaining clean records in these areas is necessary.
8. Partnerships and Guarantors
If your business is associated with other companies or individuals as guarantors, their financial health can also influence your report. For example, if a guarantor defaults on their business loan online EMIs then it might affect your creditworthiness as well.
Conclusion
The CIBIL Commercial Report is a vital document in which the business establishes its credibility regarding its financial standing, in order to, ensure that the entity can have access to credit and funding whenever needed. MSME business owners need to be proactive about keeping the report healthy by keeping up-to-date on how to positively maintain it. This not only facilitates obtaining loans at favorable terms but also increases the confidence of financial institutions and partners in the business.
The most important thing about NBFCs is their support to the business world, especially to MSMEs. They cater to the credit requirements of various businesses that might not otherwise get bank credit. Thus, they play a very significant role in the financial world. Just like traditional banks, they also analyze a business’s creditworthiness before lending any credit facility. Keeping a good CIBIL Commercial Report is equally crucial while dealing with NBFCs. However, some NBFCs offer business loans to low-credit-rated business owners to help them enhance their businesses, stabilize their financial strength, and eventually increase their credit ratings over time.
Also Read: Here’s How You Can Get an Instant Cash Loan in Minutes
