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Evaluation has become a vital part of our lives. We get graded at every aspect of our lives, right from school. However, being graded is not a bad thing. It can be a good thing as soon as you realize that it is a stepping stone to greater success as you climb higher in your career through school, college, job or even business.
What if you were told grading system is not just a part of your curriculum in a school or a part of your appraisal. Did you know the grading system can also help small and medium enterprises in availing a business loan?
We are talking about a score known as the Company Credit Report (CCR) that is similar to the credit score given to individual borrowers. While the credit score indicates the ability of the individual borrowers to repay the loan along with the accrued interest, CCR records the credit history of your business organization.
An independent organization known as the credit bureau analyzes the data submitted to it by lenders on their borrowers which includes information on the credentials of the borrowers, amount of loan, interest rate, EMI, tenure, repayment history and any defaults in repayment. Based on this data the credit bureau issues a CCR that details the information classified under different sections which the lenders can use to evaluate your business loan eligibility and decide on the terms under which they extend business loans to you.
Now that you know that the lenders evaluate you on your CCR when you apply for SME loan, it follows that you should score very highly on your CCR so that you can get terms for your SME loans. To do just that, SME Loan providers like Tata Capital offers you several tips that you may consider which can help you to secure business loans. You can first check your business loan eligibility to see where you stand.
Understand the process of creating CCR: The credit bureau evaluates you and your business based on pre-determined parameters. These include your business entity’s credentials such as ownership pattern, address, contact details, and company PAN, statutory registrations and support information of guarantors. Similarly, the credit bureau receives the information relevant to determining the creditworthiness of the business. From all the information submitted the credit bureau issues reports based on various parameters. These include credit profile summary containing information on the number of lenders, outstanding amounts and repayment status of both the borrower and the guarantor.
There is an enquiry summary which details the number of loan enquiries made by the borrower in the past 24 months. There is also a derogatory report that provides information on any legal status of willful defaults or suits filed or any guarantees given by the borrower to others. All these reports provide authentic information on the borrower. Some of the credit bureaus also give a rank which can collapse all the summary reports into one number.
Thus, it is necessary for you to understand what a CCR is so that you can take necessary action to ensure you get good reports that enhance your creditworthiness.
Take a loan that is necessary: Ensure you take a business loan only after evaluating all the parameters that affect the loan. Create a list to see where you stand currently and if you need to avail a business loan. If you tick all the boxes as yes, then a business loan may be the key to the growth of your company.
Take a loan that you can repay: Many a time, you can be euphoric and seek a loan whimsically. Remember that you have to repay the loan for business along with the interest being charged. If you have done due diligence on the need for the loan and know it is absolutely necessary and that you can repay from the business revenues then you should go for the loan. Therefore, make sure you are clear about the way you are going to spend the loan amount on improving the business. There are many repayment options you can choose from.
Monitor closely your existing loans: This is perhaps the most important aspect of business loans that you must oversee. As long as you pay all your loan instalments on time without any default there is no chance of any adverse remarks entering your CCR. Additionally, you must ensure that if there are any inadvertent glitches they are taken care of immediately as otherwise, it can reflect in the CCR. This is because there is a time delay between the time the credit bureau receives the information and the time it puts it out in the CCR after analysis. You must also obtain confirmation from the credit bureau that it has made the necessary correction.
Check the CCR of your major stakeholders: If your business depends heavily on a few stakeholders such as suppliers and distributors, it makes immense sense to monitor their CCR as well. This is because if you don’t pay your suppliers on time or your distributors do not make prompt payments for goods they receive from you it can affect your CCR adversely.
As you can clearly discern from the above, there is no substitute for good management of your business. If you run your business professionally and take care of your financial health prudently then you can rest assured that you will get the best terms for SME loans that you may require for your business. You can also ensure your business loan eligibility will be high.
Policies, Codes & Other Documents