Getting small business loans sanctioned for women entrepreneurs with low CIBIL scores can be tough and challenging. However, there are chances for you to get funds for your startup or existing business with the right preparation and painstaking efforts.
What is bad or poor credit? A credit score is represented in the form of a CIBIL score that ranges from 300-900 and any credit score, which is below 600 in your CIBIL report is considered as bad, or poor credit score. The term NA/NH in your CIBIL report means that you are ‘New to Credit’ or have ‘No Credit History’, which means that lenders don’t have enough data to analyse your creditworthiness. It can make it difficult for you to get big-ticket loans at times. However, you may get small business loans without much difficulty. When it comes to applying for business loans, it can get difficult for people with no credit history to get the loan at their own terms.
You must check CIBIL score regularly to remain updated regarding the chances of credit approvals from various financial institutions. Read on to know important measures by which you can avail small business loans, even with bad/poor credit or low CIBIL score.
7 Tips to avail Small Business Loans for Women Entrepreneurs with Bad or Poor Credit
Below-stated are the key measures by which availing small business loan is possible, even if you have bad credit or low CIBIL score:
1. Approach SFBs or MFIs
To avail funds of a lesser amount, reach out to Small Finance Banks (SFBs) and Micro Finance Institutions (MIFs). Usually, most of these lending institutions do not check your CIBIL score and only assess your financial stability, repayment capability and loan defaults, if any. Even though the interest rates are a bit higher, as compared to private and public sector banks, still, if you are eligible then you shall be able to avail funds at ease.
2. Reach out to NBFCs
The next best medium to approach is Non-banking Financial Companies (NBFCs), as generally, they are also not strict with your CIBIL score. They make sure that you can pay the loan repayments on time by checking your financial capacity and payment history.
3. Apply for Loans offered by Govt. Institutions
There are several loan schemes initiated by the Govt. of India, wherein your CIBIL score is not the only parameter to be checked by these institutions. Some of the prominent agencies offering small business loans include Mudra Loan under Pradhan Mantri Mudra Yojana (PMMY), Pradhan Mantri Employment Generation Program (PMEGP), Stand Up India, Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), psbloansin59minutes.com, etc. Usually, these institutions offer collateral-free loans at relatively lower interest rates for loan amounts up to Rs. 10 lakh which may increase as per your business requirements.
4. Apply for a Business Credit Card
With the help of a business credit card, you can obtain a credit line depending on your past payment history. The interest rates shall be on a higher side but eventually, you shall be able to avail funds to meet your immediate business requirements.
5. Avail Overdraft Facility
While availing overdraft from your respective bank, a credit limit is sanctioned against your name. You need to already have a savings or current bank account to avail overdraft for business purposes. Usually, if you have a strong and long-term relationship with the lending bank, then your CIBIL score is not considered by the bank.
6. Check out for Secured Loans
Any secured loan requires collateral/security to be submitted with the lender, such as property, gold, equipment, stock, inventory, etc. If you have a low CIBIL score and are comfortable submitting any of these as collateral, then applying for a secured loan is the best available option for you.
7. Compare Interest Rates
It is recommended to check and compare the interest rates offered by the lending institutions for all available business loan products. There may be lending institutions that might be offering interest rates to be availed by women entrepreneurs with low CIBIL score.
Ways to Improve Your Low CIBIL Score
Follow these measures to enhance your CIBIL score and avail funds at low interest rates from leading financial institutions:
∙ Check your CIBIL report regularly for errors and resolve them at the earliest
∙ Payoff all your loan EMIs and credit card dues in time
∙ Avoid being a loan guarantor or co-applicant for the applicant with a low CIBIL score
∙ Keep your old credit cards open
∙ Avoid making multiple loan enquiries in a short duration
∙ Request the credit card issuer to raise your credit limit
Women entrepreneurs with low CIBIL scores who want to start or expand their existing businesses can apply for small business loans considering the above-mentioned measures. As we all know, a bad credit score is not the end of the road. Still, you should consider improving your CIBIL score and maintain it above 750 and as close to 900, as only then you shall be able to avail of loans at low-interest rates and credit cards with added benefits.