What is CIBIL score and why is it important for business loans?


At the moment, India is an emerging market in the world, with millions of small and medium-sized businesses. Besides contributing to India’s GDP growth, these small and medium enterprises provide major employment opportunities for a large proportion of its population.

It is very common for small businesses to lack capital during their initial stages, and their CIBIL scores play a vital role in their eligibility for financing. As a result, Fintech companies are working hand in hand with Banks, NBFCs, and other financial institutions to ease growth in this segment of the economy. 

From traditional business loans to revenue-based finance, businesses now have a variety of options to choose from.

Why do you need a loan?

You might find yourself in a situation where you need money for an emergency, and you don’t have the savings to cover it. Inadequate working capital, insufficient cash flow, and the need to buy new materials can trigger such an emergency. Business loans are one possible solution to this problem. Business loans are short-term, and they can provide the funding you need to cover your emergency expenses.

Whenever you apply for a loan, you need to know what your CIBIL score is and whether you’re creditworthy. Your bank will check your credit history and make a credit report to see if you’re eligible.

What is CIBIL?

Of the four credit information companies licensed by the Reserve Bank of India, Credit Information Bureau India Limited (CIBIL) is the most popular. In addition, three other companies licensed by the RBI also provide credit information services. These companies include Experian, Equifax, and Highmark. But, the most popular credit score in India is the CIBIL score.

CIBIL Limited maintains credit files for 600 million individuals and 32 million businesses. CIBIL India is part of TransUnion, an American multinational group. Hence, credit scores in India are CIBIL Transunion scores.

To understand CIBIL scores, let’s examine what they are

Your CIBIL Score is a numerical representation of your credit history, rating, and report that ranges between 300 and 900. The closer your score is to 900, the better your credit rating.

While availing of any type of loan, whether it be for your business or personal needs, having a high CIBIL score is crucial. A high CIBIL score indicates that you are a low-risk borrower and you are more likely to repay loans on time.

How important is your CIBIL score?

In the loan application process, CIBIL scores play a big role. Whenever someone approaches a bank or financial institution for a loan, they check their CIBIL score and report first. The bank might not even consider the application if the CIBIL score is low. An applicant’s CIBIL score can help a lender decide if they’re credit-worthy based on the application and other details.

Listed below are a few reasons why it is crucial to maintain a healthy CIBIL score:


It is essential to note that your creditworthiness determines your CIBIL score as it reflects your ability to manage your finances. If you have a strong credit history, you are more likely to get a business loan.

Application Approval

Low CIBIL scores can make it difficult for you to get a loan or credit card. Some lenders may reject you if they discover that you have fallen behind on your payments and have accumulated a high amount of debt.

Interest Rate

A healthy CIBIL score makes your loan more creditworthy, meaning you pay a lower interest rate. Banks want to keep their customers happy, so they want them to stay with them

Loan Amount

Having a high CIBIL score can help you get loans of higher amounts with a longer repayment term. If two individuals are in the same line of business and other factors, but one has a better CIBIL score, the individual with the higher CIBIL score will be able to get a larger loan.

What you can do to increase your CIBIL score

If you have a low credit score or are planning to apply for a business loan in the future, here are some simple tips to improve your CIBIL score.

Timely repayments

Be sure that you pay off all your current financial obligations before the end date to avoid defaulting on your payments. This is crucial because if you default on your payments, it will impact your credit score.

Credit Utilization Ratio

Use of less than 30% of your credit card limit can reduce the risk of damage to your credit score. On the other hand, not using your credit card at all can negatively impact your credit score.

Take advantage of different types of credit

You should apply for credit if you can. If you’ve never had credit, you’ll have a lower CIBIL score, which can make it difficult for you to qualify for a loan. To improve your credit score, you should get a mix of secured loans, unsecured loans and auto loans.

This improves your chances of availing of a higher loan and a lower rate of interest when you decide to apply for a loan

Don’t apply for multiple loans or credit lines

When you open a new credit line, it increases your credit limit. However, every application creates a hard inquiry on your credit report. This measures your risk as a borrower.

If you get a lot of hard inquiries in a short time, it can negatively affect your credit score. Hard enquiries that result in a rejection are extremely bad for your credit history.

What can MyMoney do for small businesses?

As per the reports, more than 80% of small businesses fail to survive in their initial stage as they don’t have sufficient funds. To assist small businesses, the government, fintech, and traditional banks provide small business loans to this segment.

With this in mind, at MyMoney, we understand that every business is different and has different financial needs. That’s why we offer flexible, customisable Business Loans to help you get quick funding to grow your company.

Whether you’re just starting out, experiencing a slowdown, or need to get funding for anything else, we have got your back!

Not just that, with our MyMoney application you can now apply for a completely digital Current Account which comes packed with Automated Accounting, Billing, Invoicing and much more!

How to apply for a business loan using MyMoney

If you already have the MyMoney app, you can apply for a business loan right away. Or, if you do not have the application, you can download it from Google PlayStore.

With MyMoney you can get business loans starting from Rs 10,000 up to Rs 10 lakhs!

For loans up to Rs 2 lakhs, you need your PAN and AADHAR card. And in case of loans more than Rs 2 lakhs, along with your PAN and AADHAR you would also need to link your current Bank Account. You also need to upload recent bank statements within the application itself.

India is home to a huge number of SMEs, MSME’s & it’s time that they are empowered to manage their business with ease.

So what are you waiting for? Join the bandwagon of simplified banking today and avail Business Loans made just for you.



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