Credit history very much affects the business loan amount and interest rate. It is the history of the loan and credit availed by the business owner previously and also its repayment history. Most small business loan lenders check the credit history of the borrower to determine eligibility as well as the business loan amount and interest rate.
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Credit History & its Importance
also read: how to check CIBIL score for a business loan?
When one applies for a loan for business, the things that matter the most of the credit history which is also called business credit score. In general, credit score is the statement of the previously availed loans and their repayments. Credit history, CIBIL score, or credit score is assigned by the credit rating agencies, such as CIBIL and CRISIL. There are many advantages of having a good credit history and one among the same is high business loan amount.
Faster Business Loans
also read: Did you know these facts about CREDIT score?
A good CIBIL score represents that the business owner has been paying all his dues (including loan EMIs) regularly and in a timely manner. This strengthens the credibility of the business owner in the eye of the loan lender. When a loan lender sees that a business is in the green of the CIBIL scale, better loan terms will be offered.
Also, the businessman would be offered a higher business loan amount at a lower interest rate and with flexible loan repayment tenure. The loan terms and conditions would also be lenient.
Attracting Investor
also read: what are the sources of funds for women entrepreneurs?
Apart from business loan amount and interest rate, a good credit history also helps the budding entrepreneurs in getting funds from other sources as well. A good CIBIL score indicates good financial habits from the business owner’s side. Thus, investors are more confident in lending their money to the business owner.
Therefore, it is imperative for the business owner to maintain a healthy credit score. The other things with which a good CIBIL score can help is financial prudence, business loans, and asset liability management techniques.
Business Loan Repayment & Credit History
also read: how credit history helps in getting better business loans?
Many business owners wonder how a business loan help in maintaining a good CIBIL history. Firstly, the business owner would be able to avail a loan only if his history is good. So, if he has availed a loan previously, he indeed had a good credit history. Secondly, if he repays his loan in a timely manner, the credit score is further build up.
Also, with high CIBIL score, there is less risk for the loan lender. So, he is open to offering a loan for business at a low interest rate. There are many best business loan providers in India that offer credit at flexible repayment tenure. Additionally, there are no loan prepayment charges as well.
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