F-14/15, Orbit Mall, Civil Lines, Jaipur-302006
support@thetaxheaven.com
F-14/15, Orbit Mall, Civil Lines, Jaipur-302006 support@thetaxheaven.com
Consider two business owners: Rajesh and Vikram. Rajesh runs a massive wholesale unit with an annual turnover of ₹10 crores. However, he is often casual about his electricity bills, credit card payments, and previous equipment loans, often paying them a few weeks late.
Vikram, on the other hand, runs a small boutique cafe. His annual turnover is just ₹50 lakhs. But Vikram has a rule: every bill, no matter how small, is paid three days before the due date.
When both apply for business loans to expand their operations, who do you think a modern lender will prefer? Most people would guess Rajesh because his business is bigger. In reality, Vikram is much more likely to secure a faster, more affordable loan.
In today’s financial world, the size of your business is no longer the most important factor. Instead, your credit history, the story of how you handle money, takes centre stage.
In the old days of banking, lenders mostly looked at collateral (like property) and turnover. If you had a big factory and huge sales figures, you were considered safe.
However, the modern lending landscape has changed. Lenders have realised that high turnover does not always mean a healthy business. A company can have a turnover of crores but still have zero profit or be drowning in debt. This is why loan approvals today rely heavily on data and behaviour rather than just the balance sheet.
Turnover is simply the total money coming into the business. It doesn’t account for:
● High operational costs
● Existing debt burdens
● Poor cash flow management
A business with high turnover but a poor track record of paying vendors or lenders is seen as a high-risk borrower.
Your repayment history is a record of your financial discipline. It shows every loan you have taken, every credit card you have used, and, most importantly, whether you paid the instalments on time.
Lenders look at your credit history to assess your financial character. If you have a habit of paying late, it tells the lender that you might do the same with them. On the other hand, a clean record shows that you are responsible and reliable.
Financial institutions use advanced algorithms to predict risk. Statistically, a business owner who has consistently paid back small debts on time is very likely to pay back a large business loan on time. This predictability is what lenders want.
If your repayment history is the story, your business credit score is the grade you get for that story. In India, agencies like CIBIL or Experian track these scores.
While many factors go into calculating your score, the weightage given to your payment track record is usually the highest (often around 35% of the total score).
● On-time payments: Boost your score significantly.
● Delayed payments: Even a 30-day delay can cause your score to drop.
● Defaults: This is a red flag that can stop loan approvals in their tracks for years.
A low business credit score doesn't just mean your loan might get rejected; it also means that even if you do get a loan, you will likely be charged a much higher interest rate. Essentially, you pay a penalty for your past mistakes.
Digital lending and Fintech companies have revolutionised how business loans are processed. They use alternative data to assess a borrower.
Lenders are in the business of managing risk. A business with a ₹1 crore turnover and a perfect repayment record is a much lower risk than a ₹10 crore business with a history of defaults.
Lenders now look at bankable surplus. This is the money left over after all your expenses and existing loan repayments are made. If your turnover is high but your repayment history shows you are constantly struggling to meet deadlines, it suggests your cash flow is poorly managed.
Modern lending platforms use automated systems to scan your credit history. These systems can instantly flag a late payment from three years ago. Because this process is so fast and data-driven, your history becomes the most visible part of your application.
At LendingKart, they believe that every honest entrepreneur deserves a chance to grow. They understand that while turnover is important for scaling, it is your dedication to your business that truly matters.
This is why we have developed a unique way of evaluating business loans. They use our sophisticated technology to understand the health of your business.
● Fair Assessment: They look at your business's potential and your business credit score, ensuring that small but disciplined businesses get the capital they need.
● No Hidden Agendas: Their process for loan approvals is transparent and straightforward.
● Speed is our Strength: Since they rely on digital data and repayment patterns, they can approve and disburse loans much faster than traditional banks.
● Unsecured Loans: You don't need to pledge your home or factory. Your financial discipline acts as your collateral.
LendingKart is there to support your journey, whether you are a Vikram with a small cafe or a Rajesh looking to improve his financial habits.
If you feel your credit history isn't where it should be, don't worry. It is never too late to start building a better profile.
The easiest way to ensure you never miss a payment is to automate it. Set up a mandate with your bank so that your loan EMIs are deducted automatically on the due date.
When you settle a loan (paying less than the full amount due because of financial stress), it is marked as "Settled" in your credit report. This is almost as bad as a default. Always aim for a "Closed" or "Active" status by paying the full amount.
Try not to use 100% of your credit limit on cards or overdrafts. Keeping your utilisation below 30% shows lenders that you are not hungry for credit and are managing your finances well.
Sometimes, errors in the credit report can pull your business credit score down. Check your report once a year to ensure all the information is accurate.
In the modern economy, your reputation is your most valuable asset. While a high turnover is a great goal to strive for, it is your repayment history that will actually open the doors to financial support when you need it most.
By maintaining a clean credit history, you ensure that your business is always bankable. Whether you are applying for a government MSME loan or seeking a quick business loan from a digital lender like LendingKart business loan app , your past discipline will be your greatest ally.
Register & Login