Credit Report for Business Loan

Loans are not only extended to individuals but also to the business entities like a private or public limited company, proprietorships and partnership firm. Hence, good financial health is important for companies or business to acquire a business loan. A strong credit score allows a business to easily avail trade credit and loans from banks and non-banking financial corporations (NBFC). Just as your credit rating shows your financial credibility, a business credit score represents the creditworthiness of a company. CIBIL Rank is like a CIBIL Score of an individual and Company Credit Report is equivalent to a Credit Report for an individual.

What is a Company Credit Report?

A Company Credit Report is a detailed document which represents the financial health of an organization compiled based on the information received from different credit institutions. This report is used by the lenders to know the creditworthiness of an organization before granting a business loan. A typical CCR includes:

  • 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:

    It consists of company's name, class of activity and DUNS number (Data Universal Numbering System) which is a unique, nine-digit number used to identify businesses all around the world for credit check purposes.

  • Report Summary:

    It consists of various credit facilities and institutions which have granted loans.

  • Credit Type and Enquiry Summary:

    It consists of the type of loans availed and the total number of enquiries made by institutions in the past 24 months by various agencies.

  • Relationship Details:

    It consists of details of Shareholders, Directors, Partners and Holding Company among others.

  • Credit Facility Details:

    It 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:

    It consists of credit facilities guaranteed by the borrowing entity.

  • Enquiry Details:

    It consists of details of the number of times the credit report of a company has been requested by a credit institution.

  • Background Information

    This section states the business's background information like its parent and subsidiary companies, ownership, years of operation etc.

  • CIBIL Rank –

    The report also mentions the company's CIBIL Rank which is a 1-digit number ranging between 1-10; the closer a company’s rank is to 1, the better its credit health. It is like the credit score of an individual.

  • Financial Information –

    This section lists all the financial details which determine the appropriate credit levels that lenders can let them borrow.

  • Financial History –

    This section includes a brief of the company’s financial history including the repayments, collections and revenue generation.

What are the factors influencing a Company Credit Report?

Here are the few factors that impact your company’s CCR:

  1. Length of Credit History

    Similar to an individual’s credit report, a CCR is also influenced by the length of credit history. Longer the credit history, the better it is for your Company Credit Report.

  2. Credit Utilization Ratio

    CCR of a company works like that of an individual. Higher utilization of available credit portrays a company as credit hungry and hence it is considered less creditworthy.

  3. Repayment History

    Companies also have to avail several loans to keep their operations running and have to pay EMIs. Timely payment of the outstanding amount is always good- whether it is a company or an individual.

  4. Size and Life of the Company

    Older firms are likely to have better scores on their CCR as compared to start-ups. The reason behind this is that the companies operating for a longer time with continuous growth ought to be more credible as compared to the ones that are smaller and newer.

  5. Industry

    The industry-related risks might also hurt your CCR. For example, real estate is a high-risk industry because of the frequent ups and downs, so the companies that are a part of the real estate industry might be considered less creditworthy than others.

Evaluation Parameters-

If you are running a business and want to acquire a bank loan, you would need to acquire your CIBIL Company Credit Report (CCR) and 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.

  • Collateral:

    Your likelihood of getting approved for loan increases, if the application has several types of collateral in the form of business inventory, equipment, accounts receivable and property among others.

  • Capital:

    Lenders will examine the quality of capital the owner has invested in his or her company. Before applying for a loan, the owner has to make significant investments to be eligible for acquiring a business loan.

  • Leverage:

    Lenders examine the amount of debt on a company's balance sheet.

  • Inventory:

    Lenders also review the inventory of a company which are or will be ready for sale.

  • Receivables Turnover:

    Lenders will review the number of accounts receivable vis-a-vis sales.

  • Gross Profit Margin:

    Lenders will also analyse the Net sales minus cost of goods sold.

  • Liquidity:

    Lenders will review the amount of working capital of a company.

  • Turnover:

    Lenders will review the sales volume (annual) of sales taxes and discounts.

How to get your Company Credit Report?

CIBIL does not provide a free credit report for your company. However, if you want to get access to your CCR, you would need to follow the below-mentioned steps.

Step 1:

Visit CIBIL's website.

Step 2:

You need to fill out the request form along with the details such as a legal constitution and registered address of the company, name and address of the applicant requesting the CCR, contact details of the company and applicant, PAN and other details, enclosed document details and additional information.

Step 3:

Make the payment of Rs. 3,000 either through cash, credit card, debit card or net banking.

Step 4:

After making the payment, CIBIL will assign you a unique Registration ID and Transaction ID which will be mailed to your Email ID. You can use the ID to access the next steps.

Step 5:

Upload your KYC documents.

After you complete these steps, the CCR and CIBIL Rank both will be delivered to you at the earliest.