Having a CIBIL score or a credit score means you have borrowed in the past and have a repayment history. If you’ve never borrowed from a lender and don’t have a credit card, you will not have a CIBIL score.
Yes, you can get an SME loan even if you don’t have a CIBIL score or a -1 credit score. It simply means you have no repayment history, not that you’re not a creditworthy SME.
What is a CIBIL score or credit score?
Your credit score is a 3-figure value assigned to an individual or a business by a credit bureau based on your financial history. It can range from 300 – 900. Lenders use your credit score as an indicator of your creditworthiness when deciding to lend to you. The closer your score is to 900, the better is your credit score.
In India, we use the terms CIBIL score, credit score, bureau score interchangeably even though TransUnion CIBIL is one of 4 credit bureaus in India licensed by the RBI to produce credit scores and reports of people and businesses.
At CreditEnable, we check the Experian credit score of our SME customers to assess their eligibility for an SME loan. A credit score of 750 is considered ideal for getting a loan on favourable terms.
Just like CIBIL, Experian is another credit bureau in India licensed by the RBI. They produce credit scores for people and businesses based on their income and lines of credit and analyse the risk associated with lending to a borrower based on their ability to repay the loan.
Am I eligible for an SME loan if I don’t have a CIBIL score or credit score?
Yes! Small businesses that do not have a CIBIL score are still eligible to get an SME loan if they fulfil all other loan eligibility criteria. Having no credit score simply means you’ve never gotten a loan or a credit card before therefore there is no repayment history associated with your PAN card to check.
Since no credit history means no lender has tested your repayment behaviour before, you will qualify for a small loan amount with a higher interest rate and a short repayment period. This is because lenders take on considerable risk when lending to SMEs that have never gotten loans before, so they will offer loan terms that minimize their losses if you default on the SME loan.
If you don’t have a CIBIL score, you will also have to meet some additional requirements to get an SME loan. These include:
- Having a business vintage or 2 years or more
- Provide legal proof of registration that supports your business vintage
- Proof of owned property (either residential or commercial).
Note: You do not need to use this as collateral for the loan. The lender just has additional comfort knowing an SME without a CIBIL score and history of borrowings is able to own property and is, therefore, a creditworthy borrower.
As you start repaying your SME loan EMIs, you will develop your credit history and CIBIL score/credit score, and the lenders will be able to gauge your creditworthiness better. This will help you get higher value loans at better loan terms in the future.
Can I apply for an SME loan with CreditEnable if I don’t have a credit score?
Yes, you can apply for an SME loan with CreditEnable if you don’t have a credit score. These loans are usually Unsecured Business Loans which have a low loan value and repayment period, but a slightly higher interest rate.
When you apply for an SME loan on our technology platform, we’ll check your business loan eligibility by doing a soft pull of your Experian credit score. If no score (or -1) comes up, it means you have no repayment history.
In this case, after assessing other factors like your financial history, business financials, sector, etc., we’ll match you with our lender partners who do lend to first-time SME borrowers. Our partners, SMEcorner and FlexiLoans, lend to such businesses and help them build their credit history.
SMEs with no CIBIL score or credit score can get SME loans with CreditEnable lender partners. No credit score means you have no repayment track record to base your creditworthiness on.
Once you get your first SME loan, remember to keep up with all the loan terms, including your EMI schedule, to build your score and credibility with lenders. Remember to check your CIBIL score or credit score regularly to ensure there aren’t any errors on your credit report and dispute any errors to keep your credit score high.
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