• What Is a Commercial CIBIL Report and How to Improve it?

    Supply Chain 2Finance
    You probably know about CIBIL credit scores for individuals–a 3-digit numeric summary of their credit history, rating and report generated by Credit Information Bureau (India) Limited (CIBIL).

    But did you know there is a CIBIL credit score for businesses, too? It’s called a commercial credit report.

    For individuals, CIBIL produces a credit information report (CIR) and a credit score. For commercial borrowers such as companies or businesses, it generates a commercial credit report.

    What is a Commercial CIBIL Report?

    A commercial CIBIL report is a summary of credit information on commercial borrowers. It shows a comprehensive analysis of the credit behavior of a company generated by top credit rating agencies in India.

    CIBIL’s commercial report represents a business’s creditworthiness in the same way a CIBIL score indicates an individual’s creditworthiness. Most financial institutions carefully review the commercial credit reports of business entities before approving loans. Hence, companies must have the latest CIBIL commercial report and maintain a good credit score to get hassle-free commercial loans.

    The following details are included in a commercial CIBIL report:

    Background of the company Contains details on the company’s ownership, subsidiaries, legal constitution, and number of years in business.

    Financial information Specific financial data that determines the company’s borrowing capacity.

    Financial history Information about the company’s past financial performance, including payments made, amounts collected, income generated, and more.

    In addition to this, the CIBIL rank is a significant component. The company’s CIBIL rank is similar to an individual’s CIBIL score. Just as an individual’s CIBIL score ranges from 300-900, a company’s CIBIL rank ranges between 1 to 10, where 1 is the best possible rating. This ranking is exclusively available to companies with credit exposure ranging from INR 10 lakh to INR 10 crore.

    Using CIBIL’s website, businesses can check company cibil score. This helps them have up-to-date information about their CIBIL rank, which is useful, especially when applying for a business loan.

    Factors Affecting a CIBIL Commercial Report

    Many factors affect a commercial CIBIL report, some of which are as follows.

    Credit History: The duration of the company’s credit history has an impact on the CIBIL rank. A longer credit history will result in a more favorable CIBIL report.

    External or Outstanding Debts: External debt can negatively affect the company’s CIBIL rank. The credit institutions consider the overall outstanding debt amount while processing a commercial loan application. Therefore, maintaining a reasonable amount of debt is essential to prevent external debt from impacting the CIBIL rank.

    Credit-to-Debt Ratio: The credit-to-debt ratio shows the credit utilization ratio of the business. A higher credit utilization rate means that the business spends the borrowed money faster. This has an adverse effect on the CIBIL rank.

    Previous History: Operational funds assist businesses in meeting the demands of the business cycle. The money is obtained through loans, which the company repays through equated monthly installments (EMIs). Companies must pay their EMIs promptly, which indicates excellent financial health.

    Company Profile: This includes the size and life of a company. Larger, older businesses are seen as more credible than smaller, newer companies since they have a strong financial track record.

    Industry: Certain industries are riskier and have an effect on the CIBIL rank. For instance, a company operating in the oil and gas sector is considered less creditworthy than companies from more stable industries like banking and insurance. This is due to significant volatility in oil and gas prices owing to global market factors and conditions.

    The Importance of Regularly Reviewing Your CIBIL Report

    Companies must proactively review their CIBIL reports to be able to detect and correct any errors or discrepancies. Regular monitoring ensures that the business credit score profile remains favorable and allows for early intervention.

    Companies cannot obtain a commercial cibil report free, unlike individuals who can get their CIBIL report for free. Several financial institutions, NBFCs, and banks allow individuals to check their CIBIL reports online.

    However, to check their CIBIL score and get a hard copy of the report, the company must visit the CIBIL website and pay certain charges.

    How to Check Company CIBIL Score

    The credit report is available on the official CIBIL website. However, to check the company’s cibil score, depending on the plan, you must pay subscription charges. There are three plans available – basic (I month & INR 3000), standard (6 months & INR 6000), and Premium (12 months & INR 12000).

    Companies must register with CIBIL to view their credit report. They must complete the application form by providing the necessary details, such as the applicant’s address, name, and contact information for both the applicant and the company, legal constitution and registered company address, enclosed document details, PAN, and other details.

    Companies can download their CIBIL reports by following the instructions provided below:

    Step 1: Visit https://www.cibil.com/cibilrank, the official CIBIL website, and go to “ CIBIL Report Products.” Select the “CIBIL Rank & Company Report, and click the “Subscribe Now” button.

    Step 2: Next, the plan must be selected. As mentioned earlier, companies cannot get the commercial cibil report free. There are three levels available: Basic, Standard, and Premium. Depending on what you need, click the “Get for One Month,” “Get for Six Months,” or “Get for Twelve Months” option.

    Step 3: Next, you will be redirected to a screen where you need to input the GSTIN number. You can view the company’s name, address, and PAN. If there are any blank sections, fill them up promptly. Then, select “Submit and Proceed to Step 2”.

    Step 4: Next, select the payment method and complete it.

    Step 6: CIBIL will email you your transaction ID and registration ID as soon as the payment has been completed.

    Step 7: Last, upload the KYC documents. The commercial CIBIL report and CIBIL score will be sent to the registered company address within 7 working days.

    How to Improve Company CIBIL Score?

    A company can improve its CIBIL score through the following ways.

    Make sure the credit utilization ratio is always on the lower side. Don’t use up the full credit limit. Take out only loans that you believe you can repay on time. Retaining a healthy ratio of outgoing to incoming leads to business benefits.

    Pay off debts, ensuring only a feasible amount of outstanding debts is there. This helps maintain the company’s repayment ability in good standing.

    Balance assets and liabilities such that liabilities do not exceed assets

    Many companies issue company credit cards to employees to meet business expenses. In such cases, the company must ensure that payments toward credit cars are made on time. Failing to do so might lower the CIBIL Rank and have an adverse impact on the CIBIL report.

    Sometimes, credit institutions/banks can make mistakes while reporting the company’s transactions. Keep a careful eye on every transaction, and if something goes wrong, have it rectified to prevent issues in the future.

    Also read: What is Considered a Good Credit Score if Applying for a Business Loan

    The Bottom Line

    A favorable commercial CIBIL report is essential to secure hassle-free corporate loans. Companies should carefully manage the factors influencing the CIBIL report, including credit records and business dynamics. Improving corporate CIBIL scores requires strategic financial practices and vigilant monitoring. Maintaining a positive credit profile ensures lasting financial health.

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