With the rising uncertainty in the business environment, the requirement for ready access to finance has become imperative for the survival of a business. If for any reason your payments are delayed from the buyers,and you are unable to make payments towards your liabilities, it would be catastrophic for your business. Your years of hard work would count for nothing,and once you lose your goodwill, it is really tough to earn it back. There is no reason that such a situation should come up for you, especially when you have an excellent source of funding readily available to you,i.e. anon-collateral business loan.
What are non-collateral business loans?
Non-collateral business loans are commonly known as unsecured business loans. These loans are unsecured in nature,i.e. there is no need to mortgage security with the lender to secure the business loan amount. The repayment tenor for a business loan without security extends up to 24 months,and the maximum amount available is dependant on your requirements and credit profile. Business loans without collateral are meant for business purposes only,but there is no need to inform the lender regarding the end use of the money.
Unsecured business loans are an ideal borrowing option for small business owners who do not have any security to mortgage or require funding only for a short duration. They help business owners strengthen their financial position and maintain the competitive advantage over the competitors.
In order to apply for a non-collateral business loan, you can opt for an online lending platform. These platforms offer you the flexibility of applying from the comfort of your home and get your business loan application approved within 72 hours. The business loan eligibility criterion followed by these platforms is fairly relaxed and can be changed to suit your requirements.
Importance of the CIBIL Score for a Business Loan Application
Due to the recent turmoil in the financing sector in the form of bad loans, NPAs, frauds and collusions, all financial institutions have adopted a stringent screening criterion for assessing the business loan applications. One of the most important parameters that is given the highest weight while deciding the fate of a business loan application is the CIBIL score.
What is a CIBIL Score?
Trans Union CIBIL is a credit bureau that calculates your creditworthiness based on a number of parameters. Due to its extreme popularity in India, CIBIL has become synonymous with the credit score. It is a numerical representation of your creditworthiness. In order to calculate your credit score, a number of parameters are evaluated by CIBIL, such as:
- Total Outstanding Loans
- Credit card Utilisation Ratio
- Repayments towards loans
- Loan Applications filed in the recent past
- Any defaults or write-off’s
What is the best Score for a Business Loan?
Ideally, a CIBIL score of over 750 is considered as the best CIBIL score for a business loan by the lenders. This ensures that you are able to get the business loan at the lowest interest rates and most friendly terms. Any CIBIL score of 700 is also considered largely acceptable by the lenders if all other parameters are satisfactory. In case the CIBIL score is below 650, it shows poor credit habits on your part and enhances the risk perception in the eyes of the lender, who will then most probably reject your business loan application or would charge a higher business loan interest rate.
How to Maintain a Good CIBIL Score?
In the present times, when transparency has become the norm for the financing sector, it is important that you maintain a good CIBIL score as it would then open up a plethora of opportunities for your business in the future. Here are some tips to help you maintain a good credit score:
1. Make sure that your credit card utilisation ratio is below 40% under all circumstances. If your credit card utilisation ratio is above this level, it will impact your credit score negatively.
2. Make sure that you repay all your EMIs on time. Any cheque bounce or EMI return will impact your credit score negatively.
3. Do not file multiple loan or credit card applications simultaneously, as this would portray you as credit hungry. Instead, do your research and select those lenders, whose business loan eligibility criterion matches your profile.
4. Make sure that you repay all your loans in full, if you default on any loan or pay via settlement, it would have a significantly negative impact on your credit score.
5. Check your credit report for any discrepancies. Sometimes it may happen that any erroneous write-off has been written against your name even if it does not belong to you. Raise a dispute with CIBIL in this regards,and if your claim is found to be correct, that entry will be removed from your credit report.
It is important for you to observe strict financial discipline as it would bear great fruits for you in the long run.
