Credit history or credit score is an important factor that matters the most while availing a business loan. Credit history is basically the statements of the previous loans and its repayment history. The credit rating is assigned by rating agencies in India such as TransUnion CIBIL and CRISIL.
Let’s take a look at the benefits of having a good credit history while availing a business loan:
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also read: how to maintain credit score as an sme?
A good CIBIL score indicates that the business owner is repaying EMIs toward business loans in a timely manner. This strengthens the business owner’s standing in front of the NBFC and other loan lenders. When the lenders see that the business owner has a good credit history and CIBIL score, they offer better loan terms.
The business owner will be able to secure the loan at a lower interest rate, flexible repayment tenure, and easy terms and conditions.
also read: what is top up loan & what are its benefits?
If the business owner is running on a loan and wants to avail a top-Up loan on it, a good loan repayment history will help. Before sanctioning the top up loan, the lender would first check the credit history of the borrower and see if he has paid all his EMIs on time. If his credit history report is fine, the loan would be sanctioned.
The business owner can always avail a loan for business expansion in terms of starting a business at a new place. However, the benefits of credit score are not only limited to availing a capital or working capital loan. The business owner can lease out an office space for his business with a good credit report. The landlords of the premium properties these days check the credit history of the borrowers to ensure that they will be able to pay rent.
Apart from loans for business and renting office space, credit history in India can be very beneficial for budding Indian entrepreneurs. It indicates good ROI and healthy business practices on the part of the business owner. Thus, a good credit score will build confidence in the business owner to attract investors.
This clearly indicates that having a healthy credit score is important for business running in modern time. It helps in achieving numerous things that can be beneficial for business for achieving heights, such as asset and liability management, financial prudence, etc.
How availing a Business Loan helps in Maintaining Good Credit History?
Getting a loan and repaying it on time will help in building a good credit history. However, the business owner must be very careful will the terms and conditions set by the loan lender before availing a loan. The business owner may also come across the interest rate may be on the higher side. But the flexible repayment history will offset the disadvantage in terms of allowing him to repay loan according to his pocket size.
So, every successful loan repayment affects credit history positively and helps in getting business loans more conveniently and easily.