It is an undeniable truth that the chances of getting the loans sanctioned are directly dependent on the credit score of the individual and hence, it can be said with absolute certitude that having low credit score significantly affects your chances of getting a business loan. This effect also proliferates significantly if the type of loan that is applied for is an unsecured small business loan.
We need to understand that unsecured business loan is a type of loan that does not require any collateral to be attached and hence, there is no risk associated with the properties or any tangible asset. This is one of the most rewarding unsecured business loan preferred by most of the business owners because of its innumerable benefits.
Unsecured loans are dependent on the following factors:
- Business Plans: The business loans are easily granted to small and medium enterprises that have a comprehensive business plan and a detailed direction about the course of actions that will be followed in the future. This instills a feeling of confidence in the minds of the officials that the business is taken very seriously by the entrepreneurs and the business has the potential to grow.
- Project Reports: The project report comprehensively contains the ways in which the resources will be used by the team including the financial support that is being granted to the business.
- Financial History: The financial history is of immense importance to the authorities who are willing to grant the loan and that is because it directly depicts the sort of financial establishments the business is presently having and also the sort of differences that may be expected in the future.
- Transactions History: The transactional history is also of immense importance and if major transactions are made in the history of the company, chances are that the loans will also be easily granted.
- Business Potential: Business potential is evaluated by the officials in several ways. The potential of the industry and the business is one of the prime determinants when it comes to getting the loan sanctioned.
- Credit History of the Borrower: The credit history of the individual borrower is the foremost factor in the case of an unsecured business loan. Primarily because the loan does not demand to submit any assets or collaterals as a security, the prime guarantee, in this case, is the CIBIL score of the borrower.
Credit history or CIBIL score depends on the borrower’s repayment graphs. Since unsecured business loans do not demand an asset as a guarantee, the CIBIL score is the primary factor considered.
The scale ranges between 300 and 900. Where 300 is considered as low it may also affect the loan approval process and the loan amount granted. On the other hand, 900 is considered as high and helps in getting loans sanctioned effortlessly. Hence, it is recommended to have a good credit history.