Due to the rising integration of technology as well as recent instances of NPAs, frauds, and bad debts, financial services sector has undergone a lot of changes. Gone are the days when the branch manager had all the power in his/her hands regarding the fate of a business loanapplication. Now, all financial institutions are following a stringent and transparent process to process a business loan application. Your application for a business loan will be approved only if your profile meets the eligibility criterion specified by the particular lender you choose. All lenders now have a documents checklist as well as well-defined business loan eligibility criteria which is clearly mentioned on their website. Thus, you can check your profile against the eligibility criterion specified by the lender and only apply when you are satisfied that your profile matches their requirements. It will save you a lot of time and effort and would enhance the chances of your business loan application being approved.
One of the most important business loan eligibility criteria that the lenders rank very highly is your CIBIL Score. CIBIL score is essentially your credit score out of 900 which signifies your creditworthiness to lenders in a numerical form. Most lenders prefer you to have a credit score of more than 700. It lowers the risk factor for lenders and therefore, they are able to offer you money at lower interest rates. Your CIBIL Score is affected by a number of factors which are weighed by TransUnion CIBIL according to a pre-defined algorithm. Your credit score changes periodically according to your credit profile, i.e. the loans you have taken and your repayment track record.
All the financial institutions have started using the CIBIL to assess the applications of business loan applicants and take a final decisions. It is therefore important for you to select a lender who offers you the maximum convenience and comfort and help you complete the entire process effortlessly. With the rising popularity of smartphones and mobile internet, online lending companies have emerged as the preferred borrowing option for small business owners.
Online Lending Companies and their Features
Online lending companies are specialised non-banking financial corporations who conduct their operations through online channels, such as website or mobile Apps. They follow an efficient paper-less application system wherein you only need to provide the PDFs of the documents required by them to process your application. The minimal documentation process followed by them ensures that it only takes a few days to process your application. The amount is also disbursed to your account directly without any delays or hassles. They conduct an independent credit evaluation processwhich is used in combination with the CIBIL to assess your creditworthiness in a holistic manner.
If your annual turnover in the previous year was more than Rs. 10 Lakhs, online lending companies offer you unsecured loans of up to Rs. 5 Lakhs with an extended repayment tenor of up to 24 months. The rate of interest chargeable against the business loan starts from 23% p.a. There is also the option to foreclose the business loan account without incurring any additional charges.
Tips to Improve CIBIL Score
It is very important that you keep a close eye on your CIBIL score and if it goes below the level of 700, then you must take immediate corrective actions to ensure that it stays above the desired threshold only, so that you can avail credit facilities easily. Here are some useful tips to help improve your CIBIL Score:
- Pay your EMIs on Time: No matter what happens, you have to ensure that you pay all your EMIs and credit card bills on time. If you delay in making this payment, not only will you have to pay exorbitant penal charges, your credit score would also go for a toss.
- Keep your Credit Utilisation Ratio Low: If you use a credit card, make sure that at any given point of time the total credit limit utilisation is below 40%. If you are using multiple credit cards, make sure that the combined usage is below 40%.
- Do not settle a Loan: If you are foreclosing a loan or settling an old loan, make sure you pay the full amount due. If you enter in to a settlement, it will impact your credit score negatively.
- Do not apply for Multiple Loans: Do not file multiple business loan applications as it would reduce your credit score. Instead, do your research and apply with only that lender whose eligibility criteria you are able to fulfil.
- Keep old Credit Lines Active:Rather than applying for new credit cards regularly, keep your old credit card accounts active. The older your credit lines are, higher would be your credit score.
With these easy to follow tips you can ensure that your CIBIL score stays above the required threshold and you can avail required funding easily.