Credit Report for Business Loan
Owing to rapid growth of technology, which has led to increased and faster sharing of data, banks, more often than not, have all the pertinent information on the loans they underwrite. Credit reports of individuals' past business performance are, therefore, reviewed by banks before approving a loan.
What is a Company Credit Report?
CIBIL or Credit Information Bureau Limited, produces Company Credit Report (CCR). A company credit report is a record of a company's credit history. CCR is created based on the data submitted to CIBIL by banks and financial institutions across India. It is important to note that CCR is not a credit rating. However, banks review the company credit reports to evaluate and process loan applications.
What does a Company Credit Report entail?
A Company Credit Report consists of the following features:
- Report Order Number It is a number which is generated every time the customer's company report is accessed from CIBIL's database
- Profile Section Consists of name of the company, class of activity and DUNS number among others
- Report Summary Consists of number of credit facilities and institutions which have granted loans and so forth
- Credit Type and Enquiry Summary Consists of type of loans availed and the total number of enquiries made by institutions in the past 24 months by various agencies
- Relationship Details Details of Shareholders, Directors, Partners and Holding Company among others
- Credit Facility Details Consists of details of credit facilities availed by a company
- Guarantor Details Individuals or business entities which guarantee the credit facility availed by a company
- Credit Facilities Guaranteed Consists of credit facilities guaranteed by the borrowing entity
- Enquiry Details Consists details of the number of times the credit report of a company has been requested by a credit institution
What is the CIBIL Rank?
The CIBIL Rank comes from the CCR, and it is a single number that represents your CCR. It is given on a scale of 1 to 10, with 1 representing the best possible rank. Companies having current credit exposure up to Rs.50 crore can now access the rank.
Evaluation parameters
CIBIL credit report is, therefore, a record of payment history of companies based on the information provided by several leading banks, housing finance companies, financial institutions, non-banking financial companies, credit card companies among others. Also, CCR report can be used by companies to to work out better credit terms with partners or clients in that a good credit report reflects financial strength of the company. If you are running a business and want to acquire a bank loan, you need to acquire your CIBIL Company Credit Report (CCR), understand the types of business loans on offer and the methods of evaluation.
Lenders can use the CCR to make informed decisions based on the following parameters.
- Repayment capacityBanks use Company Credit Report (CCR) to evaluate a loan application, i.e, if a company can take the pressure of debt it is seeking. Banks review the repayment history of the company to determine if it has a sound track record. Late payments or defaults by a company, in all probability, will lead to the loan application being rejected.
- CollateralThere is a greater likelihood of loan getting approved, if the application has several types of collateral in the form of business inventory, equipment, accounts receivable and property among others.
- CapitalLenders will examine the quality of capital the owner has invested in his or her company. Prior to applying for a loan, the owner has to make significant investments to be eligible for acquiring a business loan.
- LeverageLenders examine the amount of debt on a company's balance sheet.
- InventoryLenders review the raw materials and goods of a company which are (or will be) ready for sale.
- Receivables TurnoverLenders will review the amount of accounts receivable vis-a-vis sales.
- Gross Profit MarginNet sales minus cost of sold goods will be analysed
- LiquidityLenders review the amount of working capital of a company.
- TurnoverLenders will review the sales volume (annual) of Sales tax and discounts
Disputes related to Company Credit Report
Dispute request can be raised on Company Credit Information Report (CCR) by customers. The types of disputes which can be raised are as follows:
- Company / Account Details Disputes can be raised about several details related to company name, address, company phone number, PAN number in addition to credit type and asset classification among others.
- Ownership Disputes can be on term ownership (an account in CCR does not belong to the concerned customer).
- Duplicate Account If the same account is reflected more than once in CCR, customers can initiate a dispute request. Fields which can be disputed are company name, registered address, branch address, telephone numbers, PAN, promoter/ partner name, legal constitution, city, state and PIN Code. Account Details: Credit type, asset classification, sanction date, sanctioned amount/ high credit, current balance, bank remark, date classified as wilful defaulter, suit filed status, date of suit and suit amount.
Resolution
CIBIL will ascertain the authenticity of the information provided by the customers vis-a-vis dispute resolution by checking with the relevant credit institutions. CIBIL will accordingly, notify the customers in 30 days.
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FAQs on Credit Report for Business Loan
- What is CIBIL Company Credit Report (CCR)
The credit history of your business is documented in the CIBIL CCR, which is derived from information that lending institutions all over India provide to CIBIL. A company's payment history provides a good predictor of future payment practices. Therefore, loan providers mainly depend on the CCR to assess and approve loan requests.
- Who can access the Company Credit Report?
Leading financial companies and banks who have given CIBIL access to all of their information are allowed to view CIBIL Credit Reports.
- How can I correct data on a CCR?
The simplest method to correct data on a CCR is to start a dispute request and submit it in a duly filled online dispute form.
- Why is my CCR's CIBIL Rank not available?
Companies having current credit exposure of up to Rs.50 crore can now access CIBIL Rank. Note that not being able to access your CIBIL rank is not a bad thing. Your CIBIL Company Credit Report can be used to assess the credit performance of your business.
- Is it possible for me to view my GST report alongside my CCR?
Yes, you can view your CCR and GST report on one online platform. A GST filing summary, a month-by-month trend of GST paid, a summary of monthly sales, etc., are included in your GST report.
- Why are credit reports necessary for companies?
Credit reports are essential for businesses to obtain loans from different lenders in the market. The primary factor in the loan approval process is CIBIL Rank, which is ranked 1 through 10, with Rank 1 being the highest and having the best chance of approval. Your chances of getting a loan approved are higher depending on how high your CIBIL Rank is.
- Can I access my Company Credit Report if my business does not have a GSTIN?
Yes, the Company Credit Report can be accessed and downloaded even if your company does not have a GSTIN. All you have to do to validate the request is upload your KYC documents. You will get a notification as soon as your documents are accepted. Your Company Credit Report and CIBIL Rank will then be available.
- What if I don't have a credit history because I have never taken a loan or credit card?
In this case, the CIBIL report will contain a score that says NA (not applicable) or NH (no history) and lenders will not instantly provide you with a loan unless you’re either able to negotiate with them or are able to take a secured loan (or secured credit card) by leveraging a fixed deposit or property and start building your credit score.
- How can my company obtain a GST report?
You can obtain your CCR and business GST report at no additional cost. To obtain your business GST report, you must complete a mandatory GSTIN and GSTIN-based authentication. The GST report can be viewed on the dashboard along with the Company Credit Report and CIBIL Rank.
- Is it possible for me to buy my GST report without my CCR and CIBIL Rank?
You cannot buy a GST report separately because it is included with your CIBIL Rank and Company Credit Report.
- Will my CIBIL report be affected if I’ve stood as guarantor on a defaulted loan?
A guarantor is a person who stands as assurance to a bank that the party who requires the loan has the ability and the capacity to repay. Hence, a guarantor can be considered partly (if not financially) liable to the lender in case a default happens. If the same person was to stand as guarantor for another loan, the bank will deem him untrustworthy and won’t consider him as a guarantor. In addition to this, the defaulted loan’s guarantor will also have a remark against him in the CIBIL report, reducing his eligibility for credit.
CIBIL Score Requirements for Loans
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