Applying for any kind of loan seems like a daunting task and some even do want to go for it in the first place because of the repayment through EMIs each month. Most feel that it might not be possible to enter into such a long term financial commitment, especially if one does not have a very high income. However, there is no guarantee that a loan would be approved just because one has a high income. For business loans for example, a lot of other factors would come into play- most importantly, the history of the business itself.
Another very important factor in this regard is the CIBIL score, which denotes the credit score of the person. It is very important to check one’s credit score before applying for a business loan because a poor score will be a poor reflection of the business turnout and the loan application might be rejected altogether. If this happens a multiple number of times, then other creditors will not even consider the loan application and it might become very difficult to apply for a business loan in future. Not to mention that the credit score might go down even further. So do all you can to improve CIBIL score.
While the definition of a good CIBIL score might differ from creditor to creditor, a score of 700 and above is considered a strong one and most creditors will be interested to look at your loan application. If the score is less than 600, then it is a good idea to bring up the credit score and then apply for the loan. Some of the things that prove to be detrimental for the loan is a credit card loan and such loans can eventually end up becoming debt traps.
Any kind of unpaid bills also end up affecting the score and this will only create a bad impression with the creditor. Of course, there are some borrowers who have long standing professional relationship with their borrowers, and a sudden dip in the score might be overlooked as a temporary lapse. However, such cases are rare and it could take years to build that kind of working relationship with the borrower. For a small businessman, it is best to ensure that the credit score does not go down beyond a certain point so that the creditors look at your application with a positive attitude.
Another reason to check your CIBIL score before applying for a loan application is to ensure that one also has a sound understanding of one’s own finances. In many cases, it has been seen that many new entrepreneurs, who might have the zeal of doing business but might not have a good financial knowhow, often rush ahead with the business loan application without realizing their own financial situation or how to they intend to pay back the loan. The CIBIL score can be a good reflection and it could help them understand that nuances of applying for loan and what it entails.
The credit rating of an individual is something that is going to be a constant companion and no matter what they do in life, especially in terms of business, the score will always be a determining factor when it comes to dealing with investors and creditors. Hence, those who have already set their heart on starting their own business someday and will be in need of financing, should try and maintain a good CIBIL score and especially check it before going ahead with any kind of business loan application with any bank or NBFC like Bajaj Finserv.