All About Business Loans, Your Credit Score & Approval - Loan Trivia

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Tuesday, 5 June 2018

All About Business Loans, Your Credit Score & Approval

An application for a business loan is subject to the credit score of the loan applicant. This is a well known fact that the credit score is one of the critical factors that determine the fate of any loan application. It is especially true for loans not backed by any collateral asset, and are solely granted on the basis of the past repayment history. In case of secured loans, there is still an asset to support the debt requested for. This score is between 300 and 900 and is based on the past credit repayment history and behaviour of the applicant or applicants, in case of joint business loans. The score is provided by credit rating agencies like ICRA and CRISIL and is used by lending institutions like banks and Non-Banking Financial Companies (NBFCs) as a parameter to determine the financial credibility and trustworthiness of an individual. The same is used to determine how likely a person is to repay a debt availed as per the decided schedule. Ideally, a score of 750 or above is considered good from a perspective of getting an approved loan.

With the basic introduction of the credit score and its nexus with business loans being more or less covered, let us now get to the factors related to this score which decide if the loan application is accepted or rejected: Multiple Credit Applications Applying for multiple credit instruments can lead to lowered credit score. For every application, the lender applied to requests for a credit enquiry which reduces the score. Regular and Timely Payments Making regular and timely payments on the existing loans and credit card dues increases the credit score over time. Credit Limit Extended Not going overboard with the credit limit extended helps in keeping the outstanding debt in check. This indirectly impacts repayment as with lower debt, chances of default are lesser. Keeping these factors in mind, an individual seeking to apply for a business loan after ensuring that the eligibility requirements are met. To know more about the same, the reference provided below should be checked out:


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