25-June-2016 written by : FSI-Team
With the recent economic downturn behind us, several businesses are once again coming out of their shells and looking to expand. Given the intensely competitive corporate environment, businesses have to face a lot of challenges like technical, geographical, sometimes political and often financial. These are the reasons that handicap the growth of a business. With the help of finance one can jump over these hurdles with ease. To get finance, one needs a favourable CIBIL report. Yes, a lesser known fact is that CIBIL does record and maintain all data regarding a company’s credit history.
Contrary to popular belief, unlike individuals, companies are not given a score. CIBIL scores are mostly associated with retail loans such as home loans, personal loans etc. CIBIL records and maintains a company’s credit history in the credit report. You may not know this, while credit scores are perceived to be important but lenders are keener to look into your report and study the information given in it rather than peek at your score. Banks and other financial lending institutions have different parameters to judge your creditworthiness. What matters is how diligent has the corporate been in repaying and will the business be able to generate enough to stay on top of the growing debt burden in future.
You have just stumbled upon a great idea which can prove instrumental to your company’s growth. You develop a business plan and ballpark the capital you would need to invest. A major roadblock in your way can be your CCR.
A CCR enables lenders to evaluate your creditworthiness and judge your repayment capacity before they grant any credit facility to you. Whether a company would apply for a credit card or seek another trade line, the bank will draw the CCR to understand the company’s history of dealing with credit.
Similar to individual CIBIL reports, you can check your CIBIL rating online at www.cibil.com. After you complete the registration form, make a payment of Rs. 3000/-, upload the necessary KYC documents, you will receive a copy of your report shortly.
Once you are holding your report, you will find the following sections in it:
Identification – Here you will see a unique order number generated every time there is an enquiry into your report and also shows who has initiated it– self or a credit institution.
Company Profile – This section shows details related to the company such as its name, address and other contact details. Each business entity is given a unique identification number, D-U-N-S Number. It helps CIBIL track your report. If this number is “99-999-9999” then it means no unique number has been given to your company as yet and will be done so shortly.
Report Summary – This section gives a thumbnail view of the whole report and shows the number of credit grantors, how many loans has the business already taken, number of facilities “closed” that is those that have been repaid in full, number of facilities for which a guarantor has been sought alongwith the date of the first & the latest credit facility taken. It also shows the number of standard credit facilities availed alongwith outstanding balances, which means those for which the payments are to be done within 90 days, which is the norm in business circles. Those facilities that are non-standard are also reported under this heading.
Under this section, you will also find number of law suits filed against this company and number of wilful defaults.
Credit Summary & Enquiry Summary – This gives a quick overview of the types of credit availed by the business entity as well as the outstanding balances. The following section shows the number of enquiries per quarter upto past 24 months.
Relationship Details – This segment shows the relationship of the authorised signatory with the company. For every new signatory, there will be a new segment of this kind, as per the details given by the lender.
Credit Facility Details – This section shows all details of loans taken alongwith the sanctioned amount, amount drawn and current balance. It also displays a schedule of payments of upto 24 months. For every credit facility granted, there is a separate segment in detail.
Guarantor Details – As the name suggests, here name, address and other details of the person or entity that has guaranteed a particular loan is displayed. It is followed by the details of the credit facility that has been guaranteed.
Enquiry Details – Finally, the report had earlier shown a snapshot of the number of enquiries but here it gives a detailed account of who has requested to extract a copy of the entity’s CCR from CIBIL, the type of credit facility applied for by the company and the amount over Whereas, a poor CIBIL score will mean you will be left rummaging for funds. Just like individuals, businesses too require financial support to meet day to day monetary requirements, for growth & expansion, so it is imperative that they make conscious efforts to maintain a favourable credit report. Just as in individual credit reports, CIBIL cannot make changes to the report and can only update on the basis of information provided by the credit institution. Incase you find a discrepancy in the report then do highlight it to the bureau and credit institution by following the Dispute Resolution Procedure. the last 24 months. The latest enquiry shows on the top of the schedule.
While there are some corporate credit agencies such as Standard & Poor’s, CRISIL, Fitch and CARE, CIBIL does not score businesses. However, a good CIBIL report is as good as a loan approved.
Credit consulting firms and credit repair companies not only help individuals with credit solutions but also help corporates find their way home. Thus, if you are keen on getting your business financed but are clueless on how should you read and manage your credit report, then do get in touch with an expert today.