How TransUnion CIBIL Credit Scores Help Small Businesses Get Easy Loans


Financial institutions such as banks and non-bank financial companies (NBFCs) take risks when lending to individuals and small businesses. This risk is increased if the loan is unsecured. These lenders require the assurance that the loan amount will be repaid on time.

Indian small businesses and MSMEs often do not have collateral or any other way to assure lenders that the loan will be repaid on time.

To reduce the risk of non-payment, banks depend on credit information and reports generated by independent rating agencies, or credit information companies.

These are specialized financial institutions that maintain a database of credit and financial information on individuals and businesses. They generate Credit Information Reports (CIR) that lenders can use to view the credit history of loan applicants and decide whether to approve or deny a loan.

Launched in 2000, one of the most popular credit bureaus in India is TransUnion CIBILformerly known as CIBIL (Credit Information Bureau India Limited). In 2017, US consumer credit bureau TransUnion acquired a 92.1% stake in CIBIL, after which it became known by its current name.

Today, TransUnion CIBIL claims to have credit data of more than 2,400 membersincluding all major banks, financial institutions, NBFCs and housing finance companies, and maintains credit records of over 550 million individuals and businesses.

Sujata Ahlawat, Vice President and Head of Direct-to-Consumer Interactivity, TransUnion CIBIL

In exclusive interaction with SMBStory, Sujata Ahlawat, Vice President and Head of Direct-to-Consumer Interactivity, TransUnion CIBILexplains why small businesses and MSMEs need a credit score and how TransUnion CIBIL meets this need.

Edited excerpts from the interview:

SMBStory: How has the borrowing capacity of MSMEs and small businesses changed?

Sujata Ahlawat: Currently, the MSME sector contributes about 29% of India’s GDP and this contribution will increase in the future. However, MSMEs continue to face challenges, with access to affordable credit being one of the most crucial.

Borrowing difficulties may be partly due to MSMEs’ lack of knowledge about their loan eligibility criteria as well as the processes and documents required for business loans. Lenders are also a bit more cautious as the MSME segment is traditionally seen as a riskier lending option, compared to other options available.

SMBS: What is TransUnion CIBIL’s role in meeting these challenges?

HER : TransUnion CIBIL Company Credit Report (CCR) and CIBIL classification play a role in facilitating MSMEs’ access to credit and loans. CIBIL Rank is an indication of a company’s creditworthiness, based on its credit history and payment habits. It ranges on a scale of one to ten and is aimed at MSMEs looking to take out a business loan and grow their business.

The CIBIL rating is used by lenders to assess the credit health of a business when taking out a business loan. This makes it a critical influencer when lenders assess a business’s loan eligibility and take out a business loan.

Through the DTC vertical, we help consumers understand and assess their creditworthiness based on CIBIL score — a three-digit numeric summary of an individual’s credit report, ranging from 300 to 900. It is also used by lenders to assess an applicant’s ability to repay before approving a loan.

SMBS: How important is the CIBIL rank? What are the advantages ?

HER : Although the CIBIL ranking can be based on credit history, it is also an indication of the company’s future repayment capacity, and lenders use the CIBIL ranking to make an informed decision when evaluating a business. business loan application. A high CIBIL rank (from one to four) is perceived positively by lenders and high-ranking MSMEs can benefit from preferential conditions from certain lenders.

We have seen lenders such as Bank of Baroda and Oriental Bank of Commerce offering preferential interest rates based on CIBIL Rank. A high rank also helps reduce the turnaround time for loan approvals, which is very important as access to capital at the right time is a concern for many MSMEs.

SMEs: How can MSMEs ensure a high CIBIL rank?

HER : MSMEs should strive to repay their creditors on time and/or within the credit period to avoid defaults or late payments. Such timely payments will be reported to CIBIL and contribute to building a higher CIBIL rank. This will be key the next time they need to apply for credit.

They should also remember to only take out the amount of loan they need. This helps them stay out of the debt trap. And the most important point is that they should regularly monitor their credit health so that they are always ready to lend and have access to credit when they need it.


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