Get the Tata Capital App to apply for Loans & manage your account. Download Now


Equipment Finance

Avail Digital Equipment Loans
up to Rs. 1 Crore

  • Attractive ROIs
  • Customizable Loan tenure

Equipment Leasing

Avail Leasing solutions
for all asset classes

  • Up to 100% financing
  • No additional collateral required

Tata Capital > Blog > Loan for Business > Does Good CIBIL Score Guarantee SME Loan Approval?

Loan for Business

Does Good CIBIL Score Guarantee SME Loan Approval?

Does Good CIBIL Score Guarantee SME Loan Approval?

Are you planning to avail an SME loan? If so, then you may want to check your credit score as it plays a huge role in getting the loan approved.

SME loans, which are a type of business loan, come with a set of eligibility criteria that a borrower must fulfil. This is where the CIBIL score comes into the picture.

Wondering what is CIBIL score and how does a good CIBIL score guarantee your SME loan approval? Read on to find out.

What is CIBIL score?

The CIBIL score is a numeric value that constitutes a consumer’s credit history. This number helps a lender decide a borrower’s creditworthiness. In a nutshell, if you have the best credit score, you are a safe borrower in the eyes of your lender.

Now, how does it affect your chances of getting business finance approved? Well, they say that our past behaviour is an indicator of our future actions. Therefore, your credit score indicates to the lender whether they can trust you in repaying the loan on time.

The CIBIL score usually ranges from 300 to 900 and the higher the value, the easier it is for you to avail a loan. A high credit score is around 800, and anything under 600 can make the process challenging. While you may still get your loan approved, it may come at a higher interest rate.

How can you improve your CIBIL Score?

In case you don’t have a good CIBIL score for business loan, you can follow this guide to improve your ranking quickly.

  • Pay your EMIs on time: Paying your dues on time can help you improve your credit score and make a positive impression about your repayment habits.
  • Avoid any Debt: To achieve a high credit score, avoid taking more loans and only take one after repaying any existing loan.
  • Monitor your Accounts: It is good to keep track of your accounts so that you never miss any payments.
  • Review your Credit History and create a good credit record with time.

Even though a good credit score is essential to avail an SME loan, it is not the only criteria. Here are some more factors that play a part in the process.

Additional Read: - Guide for First-Time SME Loan Applicants

Type of business

The nature of your business plays a critical part in getting your loan approved. Lenders consider certain types of businesses to be riskier than others, and hence, the business and industry you are involved in is important.

Monthly revenue

The revenue that your business generates indicates to the lender whether you will be able to repay the loan on time or not. Thus, the monthly revenue and annual turnover are two key elements that expedite the approval process.

Age of business

A lender will obviously consider a new business to be riskier than one that has established itself over time. Therefore, your business must be profitable for three financial years to be eligible for a loan.

Additional Read: - Benefits of applying for an SME loan by Tata Capital

Final thoughts

If you are looking to avail of an SME loan, log on to Tata Capital. Our website also offers a business loan EMI calculator to help you evaluate your EMI ahead of applying.

We provide business finance options with a whole range of perks such as low business loan interest rates and flexible repayment tenures.

You can even check your business loan eligibility on our website before applying for a loan. To know more about our offerings, log on to our website today!

Leave a Reply

Your email address will not be published. Required fields are marked *