A business loan for startups, or even MSMEs, eases several company operational needs, like working capital, venturing onto new projects, or training the workforce. An enterprise needs a good credit score or CIBIL score to apply for a business loan.
However, obtaining a business loan can be difficult for emerging or existing businesses with a low CIBIL score or bad credit history. Many business owners in India who face this challenge look for a much-needed solution. For them, this blog highlights how to obtain a business loan even with a low CIBIL score or bad credit history.
A credit score is like a financial health card. It enables the lender to analyse a borrower's credit or repayment history. Whether the due amount has been paid promptly for any existing or previous loan or if there is a default in payment, the credit score is a critical indicator of a business’s financial habits.
A credit score ranges from 300 to 900. For financial institutions, a good credit score is 750 and above. The higher the credit score (closer to 900), the better the interest rate and other competitive advantages when taking a business loan. Therefore, maintaining a good credit score safeguards a business’s trustworthiness and can help secure favourable loan terms.
An enterprise can get a business loan even with a low CIBIL score. As we mentioned, getting a loan on reasonable terms or, let’s say, with competitive interest rates may become challenging. However, despite this, businesses can still get a loan. But before applying for a business loan, there are a few common questions business owners should consider:
Asking these few questions can give a great headstart and a straightforward approach to assessing a business's financial needs.
While it may be challenging at first, obtaining a business loan is possible in many ways despite a low CIBIL score.
NBFCs, or non-banking financial companies, can provide a business loan even with a low CIBIL score. With minimal paperwork and quick disbursement, NBFCs can be a feasible platform for obtaining a business loan. At Quid, we connect you with leading NBFCs, and you can compare and find the most suitable business loan meeting your financial requirements.
Generally, a co-signer or a guarantor is someone who can take responsibility for any default in payment on behalf of the borrower. Having someone with a commendable credit score assures the lender of believing in timely payment with the support of a guarantor.
To improve your chances of obtaining a low-credit business loan, assure the lender of timely repayment by showing proof of past and present income, such as statements of current account, annual financial revenue, or IT returns. This boosts credibility and helps underscore the importance of credit scores for the time being.
Identifying lenders offering favourable terms that align with business needs is important, regardless of credit history. Look for specific indicators when seeking a bad credit business loan option.
Every lender has a unique differentiating point that attracts them to a pool of borrowers. Look for several lenders' views on repayment terms, prepayment discounts, or different types of business loans they offer. Compare these points and identify the option that aligns with your business’s requirements.
Lenders check beyond credit scores before approving the loan amount. They assess the borrower’s time spent in the market, the creditworthiness of the business, annual revenue, and other financial documents to gauge repayment capability accurately. A loan against a low CIBIL score is possible if we can satisfy the lender through various other parameters.
Several fees are involved, including origination fees, prepayment penalty fees, late payment fees, application fees, underwriting fees, and the interest rate. Considering the stipulated time frame and additional charges with interest rates, it is best to compare different lenders first.
Rather than making vague assumptions and jumping to conclusions about the ideal lender for a bad credit score, complete the application to determine the type of loan you qualify for through a soft credit check. This check runs a background scan without hampering the current credit score.
Given the many options available, choosing the right lender can feel daunting. However, we at Quid understand the importance of financial scrutiny and ensure we connect you with RBI-approved lenders only. Our personalized automated matchmaker pairs you with top lenders, offering competitive rates and repayment options for your unique business needs.
Identifying an ideal loan partner during an emergency might seem overwhelming. However, showing creditworthiness through transparent financial records, irrespective of current monetary conditions, can improve your chances of obtaining a business loan.
Moreover, apart from your credit report readings, the lender can genuinely be more interested in your business approach as long as you have a rock-solid business ready to carry out your activities. Quid empowers your business objectives and helps you connect with RBI-approved lending partners.
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