Loans are not only extended to individuals but also to business entities like a private limited company, public limited company, proprietorships and partnership firm. Hence, a good financial health is as important for companies as it is for individuals. A strong credit score allows a business to easily avail trade credit and loans from banks and non-banking financial corporations (NBFC). Just as the CIBIL score shows the financial credibility of an individual, a business credit score represents the creditworthiness of a company. CIBIL Rank is to a company what CIBIL Score is to an Individual, and Company Credit Report is the business equivalent of a Credit Report for an individual.
What is Company Credit Report?
A CCR is an elaborate document representing the financial health of an organization compiled on the basis of information received from different credit institutions. This report is used by lenders to estimate the creditworthiness of an organization before granting a loan. A typical CCR includes:
- Background Information – The report starts by stating 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 is. It is an equivalent of CIBIL score for individuals.
- Financial Information – Next the report includes more financial details which determine the appropriate credit levels that lenders can let them borrow.
- Financial History – A CCR also includes a brief of the company’s financial history including the repayments, collections, revenue generation, and more.
Apart from CIBIL, there are other credit rating agencies that provide detailed credit reports to the companies, just like they do for individual members. While this is a generic report format, it may differ from one Credit Information Company to another. However, the report generated by all agencies is based on the information procured from banks and is as reliable as the CIBIL CCR.
What are the factors influencing a Company Credit Report?
The CCR for your company is prepared by CIBIL after having a good look at your company traits and financial history. Here are a 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, better it is for your Company Credit Report.
2- Credit Utilization Ratio – CCR of a company works in a manner similar to that of an individual’s. A 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 outstanding amount is always good- whether it is a company or an individual.
4- Outstanding Debts – The amount of debts outstanding with different credit institutions is taken into account by CIBIL while preparing your CCR. Hence, it is important to maintain keep only feasible amounts outstanding.
5- 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.
6- Industry – Sometimes, the industry related risks might also have a negative impact on 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. Obviously, other factors also count at the time of assigning a CIBIL Rank.
What is CIBIL Rank?
Just as individuals are given a CIBIL Score ranging from 300-900, companies are assigned CIBIL Rank ranging from 1 to 10, where 1 is best and 10 is worst. A CIBIL Rank between 4 and 1 is considered good by most of the financial institutions. Majorly, repayment behaviour and credit utilization are the two main parameters used to calculate a company’s CIBIL Rank. CIBIL Rank is not assigned to all companies, but only to those with outstanding loans of Rs 10 Lakhs to Rs 10 Crores. However, not having a CIBIL Rank should not be considered as a negative factor for companies. It just means that your company does not fall in the criteria.
How to get your Company Credit Report?
Though CIBIL does not provide free credit report for your company, you can get access to it for just Rs 3,000. You need to fill out the request form by visiting the CIBIL website. Follow the steps given below:
Step 1- Visit the website- https://www.cibil.com/online/Company-credit-report.do
Step 2- Fill out the detailed request form. It requires you to furnish information such as 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 payment of Rs 3,000 via debit/credit card, net banking or cash card.
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 the above five steps, the CCR and CIBIL Rank both will be delivered to you at the earliest. In case you choose to purchase your CCR and CIBIL Rank through Demand Draft (DD), you can do so by downloading the request form and mailing it to the below mentioned address:
TransUnion CIBIL Limited,
One Indiabulls Centre,
Tower 2A, 19th Floor,
Senapati Bapat Marg,
Elphinstone Road, Mumbai – 400 013
Tel.: 61404300, Email:firstname.lastname@example.org
How to improve your CIBIL Rank and Company Credit Report?
For improving your CIBIL Rank and CCR, you need to understand the factors that impact it as mentioned in detail above. In a nutshell, you need to keep the following points in mind to maintain a good financial track record for your company:
- You must have taken loans in the name of your company. Taking a loan is not bad, defaulting on its payment is. So make sure to pay back all your debts in time and get rewarded with a better CIBIL Rank.
- A number of companies make use of company credit cards. If you are using one, make sure to pay the EMIs on time as an outstanding debt can have negative impacts on your CCR and your CIBIL Rank could come down.
- Sometimes, banks and credit institutions can also make a mistake while reporting your company’s transactions. Keep a close watch on each and every transaction and if there is any mistake, get it rectified to avoid repercussions in future.
- Do not exhaust your entire credit limit. Only take loans that you think you can pay back in time. Maintaining a good balance of incoming and outgoing is always good for a company.
- Taking loans for a long term and paying them on time is better as it creates a good image of the company in front of the credit institutions.