12-Apr-2019 written by : FSI-Team
Just like one would have trustworthiness among friends, folks and colleagues, one needs to have credibility with the lending institutions as well. As the trustworthiness among the worldly people would help in personal growth, the credibility among the lenders would aid achievement of financial objectives. Akin to trustworthiness that would help in professional growth, the credibility with banks will give seamless access to funds that would be needed for both personal and business.
Your past actions and dealings along with performance on various projects would facilitate strong trustworthiness in workplace. Similarly your past performance on various debt instruments will help in building a strong credit score. A credit score is all about your credibility. Higher the score, better the credibility.
Just like the business growth is attributed to its leader, and that is how we have business tycoons, the banks and other financial institutions want the business owners (irrespective of the size of the enterprise) to be strong on the repayment of obligations on personal front as well. What it means is that while the banks will definitely check the financial strength of the business, they would not want the business owner to have a low CIBIL score. Both the entrepreneur and the enterprise are interlinked to the core.
Since the business would need funding at almost all stages to grow, inability to generate funds can be damping. Let us evaluate it at various stages of a business.
A large number of people are today leaving their jobs and embarking on the entrepreneurial journey. There are host of schemes that can come to aid in their setting up of business. But past issues may become a hazard in availing benefit of these schemes. What is means is that an impaired credit history may lead to even one not being able to start the journey of being a business man.
Therefore it becomes highly important for one to be managing the credit profile all along.
You have been running a business successfully for years and now you have come across an opportunity through an extra ordinary deal. However, you need funds to be able to fulfil the deal. You apply for a business loan only to realize that the request has been rejected. So you lose out on the deal and in turn miss the chance of making money, which is the prime objective of any business. This missed deal can not only cost money but even reputation. And we all know that reputation plays a vital role in success of any business.
There could be another situation where despite low score, the lender is ready to extend funds, but the terms of loan are not conducive enough for you to realize the deal. Even in this case, logically, you will drop the loan and miss out on the opportunity.
After successfully launching and establishing the business, now you are looking at taking it to next level by adding on the capability or diversification. And you need large amount of funds to be able to achieve this desire. You have a plan in place, but the rejection of funds has led to postponing the plan. It may even lead to a situation where the growth phase just does not get to a starting point. It can be highly disheartening and demotivating. And this is because your personal credit score is not up to the mark.
A mistake committed by the child would lead to reprimanding of parents, a poor profile will only lead to business getting impacted. Thus it becomes highly important for the individual who is into business or is planning to start one, to follow credit standards that would lead to strong credit profile.