Loans are provided not only to individuals but also to corporate organizations such as private or public limited companies, proprietorships, and partnership companies. Good financial health is therefore necessary for businesses or organizations to secure a business loan. A high credit score enables commercial credit and loans from banks and non-banking financial companies (NBFC) to be readily available to a company. A business credit score reflects a company’s creditworthiness, just like your credit score indicates your financial reputation. The CIBIL Rank is like an individual’s CIBIL Score and the Business Credit Report is equal to an individual’s Credit Report.
WHAT IS A COMPANY CREDIT REPORT?
A Company Credit Report(CCR) is a comprehensive document that reflects an organization’s financial health, collected on the basis of information obtained from various lending institutions. Until approving a business loan, this study is used by lenders to understand an organization’s creditworthiness. A typical CCR includes:
- Report Order Number: It is a number that is created from CIBIL’s database every time the customer’s business report is accessed.
- Profile Section: It consists of the name, operation class, and DUNS number (Data Universal Numbering System) of the company, which is a special nine-digit number used for credit check purposes to classify companies around the world.
- Report Summary: It is made up of different loan facilities and organizations that have issued loans.
- Credit Type and Enquiry Summary: It consists of the form of loans used and the total number of inquiries made by institutions by different agencies in the past 24 months.
- Relationship Details: It consists of details of Shareholders, Directors, Partners, and Holding Company among others.
- Credit Facility Details: It consists of descriptions of a company’s credit facilities.
- Guarantor Details: Individuals or business organizations that guarantee a company’s credit facility.
- Credit Facilities Guaranteed: It is made up of credit facilities that are guaranteed by the borrowing agency.
- Inquiry Details: It consists of details of the number of times that a financial institution has submitted a company’s credit report.
- Background Information: This section lists the history details of the company, such as its parent and subsidiary entities, ownership, years of service, etc.
- CIBIL Rank: The report also discusses the CIBIL rank( CMR) of the company, which is a 1-digit number ranging from 1-10; the closer the rank of a company to 1, the better its credit health. It is like an individual’s credit score.
- Financial Information: This section lists all the economic information that decides the permissible levels of credit that lenders can allow them to borrow.
- Financial History: This section contains a description of the financial history of the company, including repayments, collections, and generation of profits.
WHAT ARE THE FACTORS INFLUENCING A COMPANY CREDIT REPORT?
Here are a few factors affecting the CCR of your company:
- Length of Credit History: A CCR is often affected by the period of the credit history, similar to the credit report of a person. For your company credit report, the longer the credit history, the better it is.
- Credit Utilization Ratio: A company’s CCR functions like an individual’s. Higher usage of available credit depicts a company as greedy for credit and is thus considered less creditworthy.
- Repayment History: Companies also need to use several loans to keep their activities going and pay for EMIs. Whether it’s a business or a person, timely payment of the outstanding sum is always good.
- Size and Life of the Company: As opposed to start-ups, older companies are likely to have higher ratings on their CCR. The explanation behind this is that, relative to those that are smaller and younger, businesses that operate for a longer period of time with steady growth should be more credible.
- Industry: The risks associated with the industry could also damage your CCR. For instance, because of the constant ups and downs, real estate is a high-risk industry, so businesses that are part of the real estate industry may be considered less creditworthy than others.
You will have to obtain your CIBIL Company Credit Report (CCR) if you are running a business and want to acquire a bank loan and understand the types of business loans on offer and the methods of assessment. Based on the following criteria, lenders should use the CCR to make informed decisions:
- Collateral: If the application has many forms of collateral in the form of business inventory, machinery, receivables, and properties, among others, the risk of being accepted for loan increases.
- Capital: The quality of capital the owner has invested in his or her company will be reviewed by lenders. The owner needs to make substantial investments before applying for a loan in order to be able to obtain a business loan.
- Leverage: On a company’s balance sheet, lenders analyze the amount of debt.
- Inventory: The inventory of a corporation that is or will be available for sale is often checked by lenders.
- Receivables Turnover: The number of accounts receivable vis-a-vis sales will be checked by lenders.
- Gross Profit Margin: Net sales minus the cost of goods sold can also be analyzed by lenders.
- Liquidity: The amount of working capital of a corporation will be checked by lenders.
- Turnover: The sales volume (annual) of sales taxes and discounts will be checked by lenders.
HOW TO GET YOUR COMPANY CREDIT REPORT?
CIBIL doesn’t provide the company with a free credit report. Nevertheless, if you want to get access to your CCR, you should follow the steps listed below:
- Visit CIBIL’s website.
- You must complete the application form along with details such as the company’s legal constitution and registered address, the name and address of the applicant requesting the CCR, the company’s and applicant’s contact details, PAN and other details, corresponding document details, and additional information.
- Pay Rs. 3,000, credit card, debit card, or net banking.
- CIBIL will grant you a unique registration ID and transaction ID after making the payment, which will be mailed to your Email ID. You can access the next steps using the ID.
- Upload your KYC documents.
The CCR and CIBIL ranks will both be delivered to you at the earliest after you complete these measures.