A business owner may require an infusion of additional funds anytime. This can be because of several reasons, be it for working capital requirements, business growth, or equipment/machinery purchase. The best way for small business owners to fulfil this requirement is through a business loan.
Just like a personal loan, a business loan also requires your personal and business credit score. The same should be equal or above the credit score threshold as required by the lender. The loan lender first studies your credit report and score and then only sanctions the loan.
Most loan lenders consider a credit score of 650 or above ideal. Also, a credit score of more than 650 leads you to get access to a business loan at a lower interest rate. So, it only makes more sense to improve your credit score before applying for a loan if it is not up to the mark.
Let’s take a look at why improving your credit score is essential.
To Fasten the Borrowing Process
A business owner decides to borrow funds when in need, and he needs access to additional funds faster. Significantly, a good credit score not only increases the chances of getting the loan application approved but also getting the application approved faster. A good score only creates a credible identity in front of the loan lender and therefore, gives a boost to your loan application.
Get Higher Loan Amount Approved
You may require funds for various reasons, ranging from smoothening out cash flow issues and leasing out factory space to buying production software. In any of these cases, you require a considerable amount of money. A good and positive credit score is required to show you as a responsible borrower. It puts you in a good position to negotiate with the lender for a higher loan amount.
When you apply for an NBFC business loan, it comes with features like online loan application, minimal documentation, and fast disbursal. You can benefit yourself with all these features.
Having a positive credit score also helps you get a business loan at lower interest rates. Since you have a significant credit score, lending you money will certainly not be a risk for the lender. Also, there would be no requirement for the lender to keep the additional interest rate as a cushion. Similarly, you also have a chance of getting to choose loan tenure as per the financials of your business. You can choose a long tenure to repay the loan amount with ease. It will also help you build a healthy credit score.
So, it can be concluded that there are numerous benefits of a good credit score. However, we would like to take your attention to the fact that your credit score is dependent on several factors, such as timely payment of debts, suitable utilisation of credit card and its timely repayment, etc. So, if you wish to improve your credit or CIBIL score to get a business loan, you need to focus on the said aspects.