Is Your Credit Score Denying You A Business Loan?

By BankBazaar | December 7, 2018

You have a stellar idea for a start-up. You gather your resources and plunge right in, only to find that your Credit Score doesn’t make you eligible for a Business Loan. The way forward? Read on to find out.

Is Your Credit Score Denying You A Business Loan?

It’s an exciting time to be doing business in India. With new and improved technologies on the horizon, the marketplace is turning out to be a successful playground for emerging start-ups.

 But, do all start-ups succeed?

Short answer – No. The reason sometimes being lack of innovation but mostly, it’s due to the absence of proper funding. If you are planning to transform your idea into a multi-million dollar success story, you need access to the right funds. A good Credit Score will take you one step closer towards that direction.

What’s a good Credit Score?

Your Credit Score is a three-digit number that is allotted to you based on your past credit history. Calculated within the range of 300-900, a Credit Score of 700 and above is generally considered to be good.

Credit Score and Loans: What’s the relationship?

If your credit history shows records of payment defaults, lenders will automatically consider you to be a high-risk customer and deny you a loan. In such cases, you will be awarded a score within the range of 300-400.

Additional Reading: What Can Hurt Your Credit Score?

A Credit Score in the range of 400-650 is still not good enough. In such cases, the lender is most likely to cancel your loan application. Even if you do get a loan, you will be asked to pay a higher rate of interest.

When your Credit Score is within the range of 650-699, your loan profile is considered as moderately risky. The lender might process your loan but with stringent terms of lending and at a higher rate of interest.

Additional Reading: How To Build A Credit History If You Don’t Have Any Existing Loans

A Credit Score of 700 and above is considered to be satisfactory. You will get to avail a loan at a competitive market price.

However, if you are looking for the best deals on Personal Loans, Business Loans or otherwise, you should look at getting a Credit Score which is 800 or higher. A Credit Score of 800 and above is considered to be excellent. In such cases, lenders will offer you an array of loan options with lower rates of interest and at a zero processing fee.

Credit Score Risk Profile Assessment
Less Than 300 Extremely High
300-400 High
400-650 High
650-699 Moderately High
700 – 799 Satisfactory

 

800 and above Excellent

Unsure about your Credit Score? Check Now

Can your personal Credit Score affect your chances of getting a Business Loan?

Although your personal Credit Score is different from your business Credit Score, there are several instances where a low Credit Score will adversely affect your chances of securing a loan for your business.

If you are running a small business:

For small businesses, it’s difficult for lenders to completely differentiate between the company and its founders. Moreover, if you are just starting out, the lenders would want to verify your profile and ensure you have enough financial stability before they get in business with you. With a good Credit Score, you will have a greater power of bargaining and it’ll be infinitely easier to ask your lender for the best deals in the market.

If you are the sole proprietor:

Your personal Credit Score will be your business Credit Score if you are the sole owner of your business. Lenders will identify the two entities as one and they will offer you loans based on your existing credit history.

If you are a partner in a partnership firm:

In a partnership business, your personal credit history will act as the liaison between you and your lender. With a good personal Credit Score, you have a higher chance of getting a loan on flexible terms.

If it’s a limited-liability company:

Yes, a limited-liability company has an identity of its own and legally, it is easily distinguishable from the identity of its shareholders. But, lenders would still want to check the credit history of all the shareholders before offering you hand-picked loans suited to put your business in the fast-track lane.

Additional Reading: How To Improve Your Credit Score Quickly

Getting a business loan is tough

If you are a small-business owner and you are not sure where to start, why don’t you take a look at the range of Personal Loans that available at Bankbazaar? With Personal Loans, you get flexible loan rates, instant disbursals, zero processing fee and many other benefits absolutely collateral-free. What’s more? You get to avoid the hassle of waiting for a business loan and focus solely on growing your start-up. Does it sound worthwhile? Choose a Personal Loan that suits you well and we’ll take care of the rest.

All information including news articles and blogs published on this website are strictly for general information purpose only. BankBazaar does not provide any warranty about the authenticity and accuracy of such information. BankBazaar will not be held responsible for any loss and/or damage that arises or is incurred by use of such information. Rates and offers as may be applicable at the time of applying for a product may vary from that mentioned above. Please visit www.bankbazaar.com for the latest rates/offers.
Category: Credit Score

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