Owing to rapid growth of technology, which has led to increased and faster sharing of data, banks, more often than not, have all the pertinent information on the loans they underwrite. Credit reports of individuals’ past business performance are, therefore, reviewed by banks before approving a loan.
What is a Company Credit Report?
CIBIL or Credit Information Bureau Limited, produces Company Credit Report (CCR). A company credit report is a record of a company's credit history. CCR is created based on the data submitted to CIBIL by banks and financial institutions across India. It is important to note that CCR is not a credit rating. However, banks review the company credit reports to evaluate and process loan applications.
What does a Company Credit Report entail?
A Company Credit Report consists of the following features:
- Report Order Number It is a number which is generated every time the customer’s company report is accessed from CIBIL’s database
- Profile Section Consists of name of the company, class of activity and DUNS number among others
- Report Summary Consists of number of credit facilities and institutions which have granted loans and so forth
- Credit Type and Enquiry Summary Consists of type of loans availed and the total number of enquiries made by institutions in the past 24 months by various agencies
- Relationship Details Details of Shareholders, Directors, Partners and Holding Company among others
- Credit Facility Details Consists of details of credit facilities availed by a company
- Guarantor Details Individuals or business entities which guarantee the credit facility availed by a company
- Credit Facilities Guaranteed Consists of credit facilities guaranteed by the borrowing entity
- Enquiry Details Consists details of the number of times the credit report of a company has been requested by a credit institution
CIBIL credit report is, therefore, a record of payment history of companies based on the information provided by several leading banks, housing finance companies, financial institutions, non-banking financial companies, credit card companies among others. Also, CCR report can be used by companies to to work out better credit terms with partners or clients in that a good credit report reflects financial strength of the company. If you are running a business and want to acquire a bank loan, you need to acquire your CIBIL Company Credit Report (CCR), understand the types of business loans on offer and the methods of evaluation.
Lenders can use the CCR to make informed decisions based on the following parameters.
- Repayment capacity
Banks use Company Credit Report (CCR) to evaluate a loan application, i.e, if a company can take the pressure of debt it is seeking. Banks review the repayment history of the company to determine if it has a sound track record. Late payments or defaults by a company, in all probability, will lead to the loan application being rejected.
There is a greater likelihood of loan getting approved, if the application has several types of collateral in the form of business inventory, equipment, accounts receivable and property among others.
Lenders will examine the quality of capital the owner has invested in his or her company. Prior to applying for a loan, the owner has to make significant investments to be eligible for acquiring a business loan.
Lenders examine the amount of debt on a company's balance sheet.
Lenders review the raw materials and goods of a company which are (or will be) ready for sale.
- Receivables Turnover
Lenders will review the amount of accounts receivable vis-a-vis sales.
- Gross Profit Margin
Net sales minus cost of sold goods will be analysed
Lenders review the amount of working capital of a company.
Lenders will review the sales volume (annual) of sales taxes and discounts
Disputes related to Company Credit Report
Dispute request can be raised on Company Credit Information Report (CCR) by customers. The types of disputes which can be raised are as follows:
- Company / Account Details Disputes can be raised about several details related to company name, address, company phone number, PAN number in addition to credit type and asset classification among others.
- Ownership Disputes can be on term ownership (an account in CCR does not belong to the concerned customer).
- Duplicate Account If the same account is reflected more than once in CCR, customers can initiate a dispute request. Fields which can be disputed are company name, registered address, branch address, telephone numbers, PAN, promoter/ partner name, legal constitution, city, state and PIN Code. Account Details: Credit type, asset classification, sanction date, sanctioned amount/ high credit, current balance, bank remark, date classified as wilful defaulter, suit filed status, date of suit and suit amount.
CIBIL will ascertain the authenticity of the information provided by the customers vis-a-vis dispute resolution by checking with the relevant credit institutions. CIBIL will accordingly, notify the customers in 30 days.
FAQs on Credit Report for Business LoanWhat if I don’t have a credit history because I’ve never taken a loan or credit card?
In this case, the CIBIL report will contain a score that says NA (not applicable) or NH (no history) and lenders will not instantly provide you with a loan unless you’re either able to negotiate with them or are able to take a secured loan (or secured credit card) by leveraging a fixed deposit or property and start building your credit score.Will my CIBIL report be affected if I’ve stood as guarantor on a defaulted loan?
A guarantor is a person who stands as assurance to a bank that the party who requires the loan has the ability and the capacity to repay. Hence, a guarantor can be considered partly (if not financially) liable to the lender in case a default happens. If the same person was to stand as guarantor for another loan, the bank will deem him untrustworthy and won’t consider him as a guarantor. In addition to this, the defaulted loan’s guarantor will also have a remark against him in the CIBIL report, reducing his eligibility for credit.