How to Manage Seasonal Business Highs and Lows with Smart Financing?

Taking a business loan can feel like a big relief. Most lenders advertise low interest rates, quick approvals, and minimal paperwork. But what many business owners realize later is that the loan costs much more than expected.

This is where hidden charges in business loans come into the picture.

Many entrepreneurs focus only on the interest rate and EMI amount, ignoring the fine print. Unfortunately, fine print often contains fees and penalties that increase the actual cost of borrowing.

In this blog, we will explain what hidden charges really are, break down the most common types of hidden charges in India, show you how to identify them before taking a loan and teach you how to avoid them.

By the end, you’ll be able to make smarter, safer, and more informed borrowing decisions.

What Are Hidden Charges in Business Loans?

Hidden charges are extra fees and costs that lenders charge apart from the interest rate. These charges are usually explained in complex legal terms or placed deep within the loan agreement, making them easy to miss.

Lenders include these charges to cover their costs, reduce risk, and increase profits. But the real issue is when these charges are not clearly explained to borrowers upfront.

Interest Rate vs Actual Cost

Many lenders promote loans at 10%–14% interest, but the real cost may be 18%–28% or more after adding Processing fees, GST, insurance, and penalties, the actual cost can rise to 18%–28% or more, known as the Effective Interest Rate or APR (Annual Percentage Rate).

Read Blog to Understand business loan interest rates, fees and charges.

Types of Hidden Charges in Business Loans

Let’s look at the most common hidden charges Indian business owners face.

 Processing Fees

It’s a one-time charge taken by the lender for handling your loan application. This includes:

• Reviewing your business and financial documents
• Checking your credit score and repayment history
• Assessing loan eligibility and risk
• Preparing loan agreements
• Disbursing the loan amount

In India, the processing fee for business loans is usually 1% to 3% of the sanctioned loan amount. Sometimes a fixed amount is charged for small-ticket loans and 18% is charged extra as GST.

Documentation & Legal Charges

These charges are usually hidden in the fine print of the loan agreement, can range anywhere between ₹2,000 and ₹25,000, and are more commonly seen in secured business loans.

These are fees for:

• Preparing loan agreements
• Stamp duty
• Legal verification of documents
• Registration (in some secured loans)

 Prepayment & Foreclosure Charges

Prepayment means paying part of the loan early, while foreclosure means closing the loan before its tenure ends. Many lenders charge 2%–5% of the outstanding amount for early repayment, and some restrict prepayment during the first 6–12 months. This often prevents borrowers from closing their loans early, even when funds are available.

Late Payment & Penal Interest

If you miss an EMI even by a few days, the lender may charge a late payment fee (from ₹500 to ₹2,000 for each delay), apply penal interest (2%–4% extra per month) on the overdue amount, and add GST on these penalties.

These charges make even small delays expensive, and repeated missed EMIs can seriously damage your business cash flow and negatively impact on your credit score.

GST and Other Taxes

18% of GST is applied on processing fees, penalties, and other service charges related to the loan. Borrowers often overlook taxes, which increases the final cost beyond what was initially expected.

Loan Cancellation Charges

If you cancel the loan after approval, Before or after disbursement.

• Cancellation fees may apply

• Processing fees are usually non-refundable

EMI Bounce Charges

The lender charges an EMI bounce fee. When your EMI fails due to insufficient balance or technical issues, or mandate problem, the lender charges an EMI bounce fee. Repeated EMI bounces can lead to heavy penalties and damage your business credit profile.

Insurance & Add-On Charges

Some lenders automatically include loan protection insurance, credit life insurance or business risk cover without clearly explaining them. The cost of these extras is often added to the loan amount, and interest is charged on them as well.

Ways to Find Out Hidden Charges Before Taking a Business Loan

• Read the Loan Agreement Carefully: Go through sections on fees, penalties, prepayment rules, and insurance to understand all costs mentioned in the fine print.
• Ask the Right Questions: Confirm the total repayment amount, additional charges beyond interest, insurance requirements, and penalties for prepayment or delayed EMIs before signing.
• Understand APR / Effective Interest Rate: Check the APR (Annual Percentage Rate) as it includes interest, fees, insurance, and taxes, giving you the true cost of the loan.
• Check the Loan Sanction Letter: Review the approved loan amount, fees deducted upfront, and EMI structure to avoid surprises later.
• Compare Lenders Properly: Compare banks, NBFCs, and online lenders based on transparency, total cost, and customer reviews instead of choosing in a hurry.

 How to Avoid Hidden Charges in Business Loans

• Choose transparent lenders who clearly show all charges, share a full fee breakup upfront, and explain loan terms in simple, easy-to-understand language.
•  Ask for a complete fee breakup in writing, including all fees, applicable taxes, and clarity on which charges are optional and which are mandatory.
• Avoid rushed decisions by taking enough time to compare multiple loan offers, carefully read the loan agreement, and ask questions before signing.
• Check prepayment terms in advance by understanding lock-in periods and choosing lenders that offer low or zero prepayment or foreclosure charges if you plan early repayment.
• Maintain good repayment discipline by keeping sufficient bank balance, setting auto-debit reminders, and tracking EMI due dates to avoid penalties and bounce charges.

How TallyCapital Helps

Hidden charges often arise due to lack of clarity and rushed decisions. TallyCapital solves this by bringing transparency and control to business lending. It provides:

• Complete Transparency: All interest rates, fees, taxes, and charges are shown upfront, with no surprises later.
• Data-Based Loan Offers: Loans are offered using your real financial data from Tally, reducing extra risk charges and add-ons.
• Easy Lender Comparison: Compare multiple loan offers in one place based on total cost, not just EMI.
• No Forced Add-Ons: Optional charges and insurance are clearly disclosed, so you pay only for what you choose.
• Quick, Informed Decisions: Simple explanations and a smooth process help you decide fast, without costly mistakes.

Conclusion: Borrow with Clarity, Not Surprises

Hidden charges may look small at first, but over time they can quietly increase your loan cost and affect your business cash flow. That’s why looking beyond the interest rate and understanding the total cost of borrowing is essential for every Indian business owner.

A transparent loan keeps your finances predictable, and your growth plans stress-free. With TallyCapital, you get clearer loan offers, better visibility into charges, and the confidence to make informed decisions.

Before you take your next business loan, take a moment to understand every fee. A little clarity today can make a big difference

Running a business in India often requires timely financial support. Whether it’s for managing day-to-day expenses, purchasing equipment, or expanding operations, a business loan can be a powerful growth tool. However, many entrepreneurs unknowingly make mistakes while applying for a business loan, which can result in rejection, higher interest rates, or long-term financial stress. 

Understanding these common mistakes and knowing how to avoid them can help you to secure a business loan smoothly and use it effectively.  

Common Mistakes While Applying for a Business Loan

Let’s look at the most frequent mistakes business owners make and how you can avoid them. 

Failing to Research Business Loan Providers

What’s the mistake? 

Many business owners apply for a loan without properly researching different lenders. They often choose the first bank or lender they come across or get influenced by quick approval promises without checking interest rates, loan terms, or repayment flexibility. 

Consequences 

When you fail to research loan providers, you may end up paying a much higher interest rate than necessary. You might also face hidden charges, strict repayment schedules, or poor customer support. In some cases, applying to the wrong lender can even result in outright rejection because your business profile does not match their lending criteria. 

How to avoid it (Solution) 

To avoid this mistake, take time to compare multiple lenders before applying. Look beyond just interest rates and understand processing fees, repayment tenure, and flexibility in EMIs.

Choosing TallyCapital as a transparent and reliable lending partner can help you find loan options that suit your business needs without hidden surprises. 

Not Paying Attention to Your Credit Score

What’s the mistake? 

Many business owners believe their personal credit score does not matter when applying for a business loan. This is especially common among sole proprietors and small business owners. 

Consequences 

Ignoring your credit score can significantly reduce your chances of loan approval. Even if your business is doing well, a poor personal credit score can lead to rejection or result in lenders offering loans at higher interest rates with stricter conditions. 

How to avoid it (Solution) 

Before applying for a business loan, check your credit score and ensure it is in good shape. Paying EMIs and credit card bills on time, keeping credit utilization low, and correcting any errors in your credit report can improve your score and increase lender confidence. 

Borrowing More Money Than Required

What’s the mistake? 

Some business owners apply for a higher loan than they actually need, assuming extra funds will be useful later. While this may seem like a safe approach, it often creates unnecessary financial pressure. 

Consequences 

Borrowing more than required increases your monthly EMI burden and overall interest outgo. This can affect your cash flow, making it harder to manage daily business expenses and increasing the risk of default. 

How to avoid it (Solution) 

Calculate your business requirements carefully and borrow only the amount you truly need. Planning your expenses and having a clear repayment strategy ensures the loan supports growth instead of becoming a financial burden. 

Submitting Incomplete or Incorrect Documents 

Documentation is the backbone of a business loan application. Many applications are rejected simply due to missing or incorrect paperwork. 

Common document mistakes include: 

• PAN mismatch between business and bank records 

• Missing Bank Statements 

• Unfiled income tax returns 

• Incorrect business address details 

• Outdated registration certificates 

Consequences 

Incomplete paperwork can slow down the approval process and reduce your credibility in the eyes of lenders. In some cases, repeated document issues can result in your loan application being rejected altogether. 

How to avoid it (Solution) 

Ensure all required documents are updated and consistent. Preparing these documents in advance makes the loan process faster and smoother. 

Applying for Multiple Business Loans Simultaneously

What’s the mistake? 

To increase approval chances, some business owners apply to multiple lenders at the same time without realizing the impact on their credit profile. 

Consequences 

Each loan application triggers a credit inquiry, and multiple inquiries within a short period can lower your credit score. Lenders may view this as a sign of financial distress, reducing your chances of approval. 

How to avoid it (Solution) 

Apply through a single trusted platform like TallyCapital after checking eligibility. This reduces unnecessary credit inquiries and improves your chances of approval without harming your credit score. 

Not Going Through the Terms and Conditions

What’s the mistake? 

Many borrowers focus only on the loan amount and interest rate while ignoring the detailed terms and conditions mentioned in the loan agreement. 

Consequences 

Skipping the fine print can lead to unexpected charges, penalties for late payments, or high foreclosure fees. These hidden costs can significantly increase the total cost of the loan. 

How to avoid it (Solution) 

Always read the loan agreement carefully and clarify any doubts before signing. Understanding prepayment charges, penalty clauses, and repayment terms helps you avoid unpleasant surprises later. 

Conclusion 

Applying for a business loan is a crucial financial decision that should never be rushed. By avoiding these common mistakes and taking a thoughtful approach, you can improve your chances of approval and ensure the loan truly supports your business growth. Careful planning, financial awareness, and choosing the right lending partner can make all the difference in your business journey. 

Here at TallyCapital, we offer free loan consultation before you apply for a business loan, and you will clearly get to know all loan terms, hidden charges, repayment conditions, and lender policies in simple language, so you know exactly what you’re signing up for. This way, you can choose the right loan with full clarity and no surprises later. 

FAQs

Q1. What are the most common mistakes while applying for a business loan?
Common mistakes include ignoring credit score, borrowing more than required, submitting incomplete documents, and applying to multiple lenders at once.

Q2. Does credit score matter for a business loan in India?
Yes. Both personal and business credit scores play a major role in business loan approval, especially for MSMEs and sole proprietors.

Q3. Can applying for multiple business loans affect approval?
Yes. Multiple loan applications result in multiple credit inquiries, which can reduce your credit score and lower approval chances.

Q4. Why do business loans get rejected even if the business is profitable?
Loan rejections can happen due to poor credit history, high existing EMI burden, incomplete documents, or mismatch with lender criteria.

Q5. How can I avoid business loan rejection?
Research lenders, check eligibility, maintain a healthy credit score, submit accurate documents, and borrow only what you need.

Every business in India needs financial support at some stage, whether it’s a small shop managing daily expenses, a startup planning growth, or an established business exploring new opportunities. Business loans act as a strong financial backbone, helping entrepreneurs turn their plans into reality. 

Yet, one question worries most business owners: “Am I eligible to get a business loan?” 

At TallyCapital, we know that loan eligibility can feel overwhelming. That’s why this blog explains business loan eligibility criteria in a clear, structured, and easy-to-follow way for Indian businesses. By the end of this blog, you’ll understand what lenders look for and how you can improve your chances of getting your business loan approved. 

What Is a Business Loan? 

A business loan is money borrowed from a bank or financial institution to meet business-related needs. Unlike personal loans, this money must be used only for business purposes. 

Indian businesses take business loans for many reasons: 

• Working capital requirements 
• Business expansion or diversification 
• Purchasing machinery or equipment 
• Managing cash flow gaps 
• Hiring staff or increasing inventory 

Business loans can be secured or unsecured. Secured loans require collateral, such as property or equipment. Unsecured loans do not need collateral but usually come with higher interest rates. 

If you are a Tally user, you already maintain sales, expenses, GST, etc , digitally. This financial discipline helps lenders trust your business more easily. 

Why Business Loan Eligibility Matters 

Eligibility is one of the most important parts of the loan process. It decides whether your loan will be approved, how much loan you will get, and at what interest rate. 

Many business owners apply for loans without checking eligibility. When the application gets rejected, it not only wastes time but can also affect their credit score. Multiple rejections can make future loan approvals difficult. 

Eligibility matters because: 

• It helps lenders assess repayment capacity 
• It reduces the risk of loan default 
• It determines interest rates and loan amount 
• It improves approval chances when criteria are met 

For example, a small retailer with steady sales and proper accounts has a higher chance of approval than a business with irregular income and missing records. 

Understanding eligibility before applying helps you apply smarter and with confidence. 

Factors Affecting Business Loan Eligibility 

Lenders evaluate your business using several factors. Let us look at the most important ones in simple terms. 

Business Vintage 

Business vintage means how long your business has been operating. Most lenders prefer businesses that have been running for at least 1 to 3 years. 

A business that has survived for a few years shows stability and experience. New businesses can still apply, but loan options may be limited or require additional guarantees. 

Annual Turnover 

Turnover shows how much revenue your business generates in a year. Lenders usually have a minimum turnover requirement. 

They are looking for: 

• Consistent sales overtime 
• Growth or stability in revenue 
• Genuine business transactions 

For example, a business with ₹25 lakhs annual turnover and proper records will find it easier to qualify than a business with high but irregular sales.  

Credit Score  

Credit score is one of the most important factors lenders consider while evaluating a business loan application. It reflects how responsibly credit has been managed in the past. Even if your business is doing well, a weak credit profile can negatively impact loan approval. 

Most lenders prefer a credit score of 650 or above. A higher score increases approval chances and can also reduce interest rates. 

Credit score evaluation is mainly divided into two parts: 

Personal Credit Score

The personal credit score reflects how well a business owner manages personal loans, credit cards, and repayments. Lenders use it to judge the owner’s financial discipline, especially for small businesses and proprietorships. 

Business Credit Score

The business credit score represents the credit history and repayment behavior of the business entity. It helps lenders assess the financial stability and reliability of the business while approving a business loan. 

Read the following blog to improve your credit score.

Business Type and Structure 

The structure of your business also matters. Lenders usually offer loans to: 

• Sole proprietors 
• Partnership firms 
• LLPs 
• Private limited companies 
• MSMEs 
• Self-employed professionals 

Registered and compliant businesses are viewed as more reliable. 

Cash Flow and Profitability 

Profit is important, but cash flow is equally critical. Lenders want to ensure that your business generates enough cash to repay EMIs regularly. 

They check: 

Monthly inflow and outflow: This shows how much money comes into your business and how much it goes out every month. 

Expense management: This refers to how well your business controls and records its regular costs and spending. 

Net profit margins: This indicates how much actual profit your business earns after all expenses are deducted from sales. 

A business may show profit but still struggle with cash flow. Proper cash flow tracking in Tally helps avoid this issue. 

Existing Loans and Liabilities 

If you already have multiple loans, lenders may worry about the repayment burden. 

That does not mean you cannot apply. It simply means your income and cash flow should comfortably support additional EMI payments. So, try to close unnecessary loans before applying for a new business loan. 

Bank Account Statements 

Bank statements are used to analyze: 

• Transaction volume: Indicates how active and stable your business operations are. 
• Average monthly balance: Reflects your ability to maintain sufficient funds in the account. 
• Financial discipline: Reveals how well you manage payments and banking behavior. 

Most lenders ask for 6–12 months of bank statements to assess overall financial health. 

Tip: Avoid cheque bounces and irregular transactions, as they can reduce your loan eligibility. 

Business Location and Industry Type 

Your business location and industry also affect eligibility. 

• Businesses in stable and growing industries are preferred 
• Certain high-risk industries may face stricter checks 
• Urban and semi-urban locations often get better access to loans 

That said, many lenders now support small businesses in tier-2 and tier-3 cities as well. 

Age of the Business Owner 

Most lenders have age criteria such as: 

• Minimum age: 21 years 
• Maximum age: 65 years 

This ensures the borrower remains actively involved in the business during the loan tenure. 

Who Can Apply for a Business Loan in India? 

Business loans in India are available to many types of applicants. Here is a clear overview: 

Documents Required for Business Loan Eligibility 

To assess eligibility, lenders usually ask for: 

• Identity proof (Aadhaar, PAN) 
• Business proof and registration documents 
• Address proof of business and owner (Utility bills, rental agreement, or registered lease) 
• Bank statements (6–12 months)  
• Income tax returns (2-3 years) 
• Financial statements (profit & loss statements, balance sheet) 
• GST returns (if applicable) 

Having all documents ready speeds up approval. 

But with TallyCapital, you won’t need all this paperwork. You can get loan offers based on your financial data already maintained in TallyPrime making the process faster, simpler, and hassle-free. 

 No repeated uploads. No chasing documents. Just quick, data-driven loan offers. 

How to Improve Your Business Loan Eligibility 

Here are some practical steps to increase your chances of approval: 

• Maintain proper financial records 
• File income tax and GST returns on time 
• Check your credit score regularly 
• Keep business bank transactions clean 
• Ensure consistent income growth 
• Avoid excessive debt 

Planning ahead makes a big difference. 

Why Choose TallyCapital for Business Loans? 

At TallyCapital, we specialize in business loans only. Our focus is to understand your business needs and offer suitable financing solutions with: 

• Simple eligibility criteria 
• Minimal documentation 
• Faster approval process 
• Flexible repayment options 
• Transparent terms 

We believe every business deserves access to the right financial support at the right time. To help you plan smarter, TallyCapital offers a free Business Loan Eligibility Checker that shows how much financing your business may qualify for based on your current financials, helping you make decisions confidently before applying for a loan. 

Final Thoughts 

Understanding business loan eligibility criteria is the first and most important step toward getting funding for your business. By knowing what lenders expect, you can prepare better, avoid rejections, and secure the funds you need to grow. 

Whether you’re looking to manage working capital, expand operations, or stabilize cash flow, a business loan can be a powerful tool when used wisely. 

If you’re planning to apply for a business loan, make sure your business is financially ready and compliant. And when you are, TallyCapital is here to support your growth journey. 

Need help knowing your business loan eligibility? Connect with TallyCapital and take the next step toward business success. 

FAQs – Business Loan Eligibility in India 

Can a new business apply for a business loan?
Yes, but options may be limited. New businesses usually need strong income proof or a co-applicant. 

What is the minimum credit score required?
Most lenders prefer a score of 650 or above. A higher score improves loan terms. 

Can I get a business loan without collateral?
Yes, unsecured business loans are available. However, interest rates may be higher. 

How much loan can I get based on turnover?
Loan amount depends on turnover, profits, and repayment capacity. Higher turnover usually allows higher loan amounts. 

Do GST returns affect eligibility?
Yes. Regular GST filing shows compliance and stable sales, which improves eligibility. 

Running a micro, small or medium business in India is not easy. You manage sales, staff, suppliers, GST, and cash flow often all at the same time. In between all this, credit score usually feels like a “bank problem,” not a business one. 

But the reality is different. 

Even if your business is doing well, a poor credit score can affect your chances of getting a business loan. In many cases, it leads to rejection, higher interest rates, or lower loan amounts. 

If you are already using TallyPrime, this matters even more. Your business data on Tally may be strong, but small credit score mistakes can still slow you down. 

Let’s understand the most common credit score mistakes MSME (Micro, Small and Medium Enterprise) owners make and how they directly affect business loans. 

What Is a Credit Score and Why MSMEs Should Care 

A credit score is a number that shows how responsible you are with borrowed money. Banks and NBFCs use it to decide whether they can trust you with a loan. 

In India, credit scores usually range from 300 to 900. A higher score means lower risk for the lender. 

Many MSME owners believe credit scores matter only for personal loans. That is a common misunderstanding. When you apply for a business loan, lenders often check your personal credit score, especially if your business is closely linked to you as the owner. 

A good credit score can help you get: 

• Faster business loan approvals 
• Lower interest rates 
• Higher loan eligibility 

A weak credit score does exactly the opposite, even when your business performance looks healthy. 

Common Credit Score Mistakes MSME Owners Make 

Mixing Personal and Business Finances 

This is one of the most common mistakes among MSME owners. 

Many business owners use personal credit cards or personal loans for business expenses. For example, paying suppliers through a personal card or using a personal loan to cover short-term business losses. 

When business cash flow slows down, personal repayments get delayed. That delay affects your personal credit score, which lenders check during business loan approval. 

Keeping personal and business finances separate makes your credit profile much cleaner and easier to manage. 

Missing or Delaying Loan or Credit Card Payments 

Many MSME owners think a delay of a few days will not matter. But even one delayed EMI can reduce your credit score. This usually happens during seasonal slowdowns. You may delay an EMI to manage salaries or rent first. From a lender’s point of view, this signals stress repayment. 

Repeated delays in payment make it harder to get capital or short-term business loans when you need them the most. 

Using Too Much of the Credit Limit 

Using most or all your available credit limit can damage your credit score. If you are using more than 70–80% of your credit limit, it indicates financial stress. 

For example, if your credit card limit is ₹2 lakh and you regularly use ₹1.8 lakh or more, it indicates financial pressure. Even if payments are on time, high credit usage is seen as risky behavior. 

Maintaining lower credit utilization shows better financial discipline and improves your loan eligibility over time. 

Applying for Multiple Loans at the Same Time 

When cash flow is tight, many MSME owners apply for loans everywhere like banks, NBFCs, loan apps, and online platforms. 

Each application creates a credit enquiry. Too many enquiries in a short period reduce your credit score. They also tell lenders that the business may be under financial pressure. 

Applying strategically, instead of applying everywhere, helps to protect your credit profile. 

Ignoring Credit Reports 

Many MSME owners never check their credit report, assuming it is always correct. This can be costly and affect your score. 

Sometimes errors appear in reports. A closed loan may still show as active. A paid EMI may appear overdue. Without checking, you may not even know why your business loan was rejected and these errors can unnecessarily reduce your credit score and cause loan rejection. 

So, regularly reviewing your credit report at least twice a year helps you fix such issues before they affect your plans. 

You can check your credit score on TallyCapital for free at anytime of the year.  

Closing Old Credit Accounts Too Early 

Some business owners close old credit cards or loans thinking it will improve their score. But credit history matters. Because older accounts show long credit history, stability and repayment discipline. 

Closing them suddenly can shorten your credit history and reduce your score. It means if an account is not harmful, it is often better to keep it active with minimal usage. 

Not Having Enough Credit History 

Some business owners avoid loans completely, thinking it is safer. But having no credit history can also work against you. 

If lenders have nothing to evaluate or analyze, approving a business loan becomes difficult, especially for first-time borrowers. 

Even a small loan or credit card, when managed well, helps build trust over time. 

Becoming a Loan Guarantor Without Understanding the Risk 

Many MSME owners agree to be a guarantor for someone else’s loan without thinking it through. The mistake is assuming that it won’t affect them directly. 

If the borrower misses payments, the responsibility comes to you. This impacts your credit score even though you never took the loan for yourself. Later, when you apply for a business loan, lenders see this as a risk and may reject or delay your application. 

What you should do is avoid becoming a guarantor unless it is truly necessary. Always understand the full repayment responsibility before agreeing. 

Taking Short-Term Loans Repeatedly 

Short-term loans seem helpful during cash shortages, but depending on them regularly is risky. The mistake is using these loans to manage daily business expenses instead of planning cash flow. 

Frequent short-term borrowing creates high repayment pressure and signals poor financial stability. Lenders may hesitate to offer long-term business loans when they see this pattern. 

The right approach is to plan cash flow better and use structured business loans only when they support growth, not survival. 

How These Credit Score Mistakes Affect Business Loans 

These mistakes may seem small, but their impact is serious. 

You may face: 

• Rejection of business loan applications 
• Higher interest rates than expected 
• Lower loan amounts 
• More documentation and stricter terms 

Most importantly, loan approvals get delayed when timing matters—for inventory purchases, expansion, or seasonal demand. 

For MSMEs, access to funds at the right time is critical. Credit score directly affects that access. 

How MSME Owners Can Improve Their Credit Score 

Improving your credit score does not require complex planning. It requires consistency. 

• Pay all EMIs and credit card bills on time, even during slow months. 
• Avoid mixing personal and business expenses as much as possible. 
• Use credit wisely and avoid maxing out limits. 
• Check your credit report regularly and correct errors quickly. 

Even small improvements, when done consistently, make a big difference over time. 

How TallyCapital Helps MSMEs Get Business Loans Easily 

As a Tally user, you already manage your business data digitally. This is a major advantage. 

TallyCapital uses your real business data, such as cash flow and transaction history, to understand your actual business performance. This allows lenders to look beyond just past credit score mistakes. 

With TallyCapital, MSMEs benefit from: 

• Faster loan decisions 
• Quick loan offers based on real business data 
• Better access to business loans, even when traditional lenders hesitate 

Instead of judging only on past credit behavior, TallyCapital focuses on your present business strength. 

Conclusion 

Credit score mistakes are common among MSME owners. The good news is that most of them are fixable. 

By understanding how credit scores work and improving small financial habits, you can protect your loan eligibility and reduce borrowing costs. 

If you are already using Tally, you are in a strong position. Use your business data wisely, plan loans carefully, and let TallyCapital support your business growth at every stage. 

FAQs

1. Does credit score affect business loans for MSMEs?
Yes. Most lenders check the personal credit score of MSME owners, especially for proprietorships and small businesses.

2. What is a good credit score for MSME business loans in India?
A credit score above 700 generally improves approval chances and helps secure lower interest rates.

3. Can MSMEs get business loans with a low credit score?
Yes, but options may be limited. Platforms that use business data, like cash flow and transactions, may still offer loans.

4. How often should MSME owners check their credit score?
At least twice a year, or before applying for any business loan.

5. Do delayed EMIs really impact business loan approval?
Yes. Even a single delayed EMI can negatively affect your credit score and delay or reject loan approvals.

When business owners think about taking a loan, one question almost always comes up first: “Is my credit score good enough?”

While credit score is important, it is not the same as loan eligibility; and confusing the two often leads to unrealistic expectations, unnecessary stress, or even avoidable rejections.

In India, many entrepreneurs assume that a high credit score guarantees loan approval, while a low score means their chances are over. The reality is more nuanced. Lenders do not approve loans based on a single number. They evaluate both your past credit behaviour and your current business strength before making a decision.

This is where the difference between credit score and business loan eligibility becomes critical.

In this guide, we break down what credit score really means, how loan eligibility is calculated, how the two are connected, but not interchangeable and what business owners can do to improve their chances of getting a loan approved smoothly and confidently.

What Is a Credit Score? 

A credit score is simply a number that shows how responsibly you’ve handled your credit. In India, it usually ranges from 300 to 900 and is calculated by credit bureaus like CIBIL, Experian, Equifax, and CRIF High Mark. 

Credit Score Range in India: 

While exact benchmarks vary, here is a simple way to understand it. 

• A score closer to 900 is considered very strong.
• A score above 750 is generally good.
• A score between 650 and 750 is average.
• A score below 650 may raise concerns. 

This does not mean that loans are impossible with a lower score. It only means lenders will look more closely at other factors. 

For lenders, your credit score is a quick way to assess risk. It answers one simple question: “Has this borrower repaid loans responsibly in the past?” 

A good credit score helps you: 

• Get faster loan approvals 
• Access higher loan amounts 
• Secure better interest rates 
• Build lender confidence 

What Impacts Your Credit Score? 

Your credit score shows how responsibly you handle borrowed money. For business owners, understanding what affects this score helps in improving loan approval chances. 

Repayment history has the biggest impact. Paying EMIs and credit card bills on time builds trust with lenders. Even a few missed or delayed payments can lower your score quickly. 

Credit utilization means how much of your available credit you use. If you regularly use a large portion of your credit limit, it signals financial pressure. Keeping usage low shows better control and helps your score. 

Number of active loans also matters. Having too many loans at once increases your financial burden. Lenders may see this as higher risk, even if you pay on time. 

Loan enquiries affect your score when done frequently. Applying for many loans in a short time suggests urgent credit needs, which can reduce lender confidence. 

Length of credit history shows how long you’ve been using credit. A longer history gives lenders more confidence, while a very short history may limit your score growth. 

What Is Business Loan Eligibility? 

Loan eligibility simply means how much loan your business can realistically repay at the present time. It helps lenders decide whether you qualify for a business loan and what loan can be safely given to you. Unlike a credit score, loan eligibility is not a fixed number and keeps changing as your business income, expenses, and cash flow change.  

For business loans, lenders focus more on your current business performance rather than only your past record. This includes your sales, profits, existing loans, and overall financial stability. At TallyCapital, loan eligibility is checked quickly using your business data, helping you understand your chances of approval in just a short time, without long waiting periods. 

Key Factors That Decide Business Loan Eligibility 

While credit scores are important, lenders consider many other business-related factors.

Credit Score

A good credit score helps lenders trust you, but it alone does not guarantee loan approval. It is only one part of the eligibility check.

Business Vintage

Businesses that have been running for at least 1–3 years are seen as more stable. Longer business history usually improves loan eligibility.

Business Turnover

Regular and higher turnover shows that your business earns consistently. This assures lenders that you can repay the loan on time.

Profitability

Stable profits increase lender confidence. When your business makes steady profits, lenders feel more confident about lending. Profitable businesses are considered less risky.

Cash Flow

Smooth and regular cash flow help manage EMIs easily. Lenders prefer businesses with predictable income and expenses 

Bank Statements

Healthy bank transactions reflect real business activity. Clean and active bank statements strengthen your loan eligibility.

Existing Liabilities

If you already have many ongoing loans, lenders may hesitate. Fewer liabilities mean better chances of loan approval. 

Age Factor

The borrower must be between the age of 21-65 is eligible for business loan. 

Also read – 7 Key Lending Ratios That Banks Check for Business Loans

Credit Score vs Loan Eligibility: Key Differences 

Is a Good Credit Score Enough for a Business Loan? 

No, a good credit score alone is not enough to get a business loan. It helps, but it is only one part of the decision. 

Example: 

Imagin a shop owner who has a credit score of 780. On paper, this looks excellent. However, his business income is irregular, and his bank statements show inconsistent cash flow. In this case, a lender may hesitate or even reject the loan because the repayment ability is uncertain. 

Now consider another business owner with a credit score of 680. The score is average, but her business shows steady monthly turnover, clean bank statements, and regular GST filings. This tells lenders that the business can comfortably repay the loan. As a result, the loan may still get approved. 

This is why TallyCapital look beyond just the credit score. They evaluate the complete business profile to understand the real financial strength of the business before making a lending decision. 

What If Your Credit Score Is Low? 

Many Indian MSMEs and small business owners worry about loan rejection due to low credit scores. However, a low score does not always mean “no”. 

TallyCapital helps business owners by: 

• Offering free credit reports with insights 
• Providing suggestions to improve credit scores 
• Evaluating business performance along with credit behavior  

If your business fundamentals are strong, you may still be eligible for funding. 

How to Improve Credit Score for Better Loan Eligibility 

Here are simple steps business owners can follow: 

• Pay EMIs and credit card bills on time 
• Keep credit utilization below 30–40% 
• Avoid unnecessary loan applications 
• Clear overdue payments 
• Maintain healthy bank balances 

Improving credit score gradually increases loan eligibility and reduces borrowing costs. 

How TallyCapital Simplifies Business Loans 

TallyCapital is a simple, smart, and superior financing solution for Indian businesses from the house of tally. 

What TallyCapital Offers: 

• Business loans up to ₹15 Crore 
• Term Loans, LAP, CGTSME, and Professional Loans 
• Quick eligibility checks in under a minute 
• Compare lenders and EMIs using Offer Central 
• Flexible repayment options from 12 to 84 months 
• Expert assistance throughout the loan journey  

TallyCapital acts as a business growth partner, helping entrepreneurs choose the right loan, not just any loan. 

Final Thoughts 

Understanding Credit Score vs Loan Eligibility is essential for every Indian business owner planning to take a business loan. 

• Credit scores show your past financial discipline 
• Loan eligibility reflects your present business strength 
• Both determine approval, loan amount, and interest rate 

Instead of focusing only on credit scores, business owners should strengthen overall financial health and choose the right lending platform. 

With solutions like TallyCapital, business loans become transparent, fast, and growth oriented. 

FAQs

Q1. Is credit score and loan eligibility the same?
No. Credit score reflects your past credit behaviour, while loan eligibility evaluates your current ability to repay a loan based on income, cash flow, and business performance.

Q2. What is a good credit score for a business loan in India?
A score above 750 is generally considered good, but loans can still be approved with lower scores if business fundamentals are strong.

Q3. Can I get a business loan with a low credit score?
Yes. Many lenders assess business turnover, cash flow, and bank statements along with credit score before approving a loan.

Q4. How can I improve my business loan eligibility?
Maintain steady cash flow, pay EMIs on time, reduce existing liabilities, keep credit utilisation low, and avoid frequent loan enquiries.

Q5. Which matters more for business loans – credit score or loan eligibility?
Both matter, but loan eligibility often carries more weight because it reflects your current repayment capacity.

Many Indian business owners avoid loans in the initial stages. Some don’t want the pressure of EMIs. Others feel they might get rejected due to lack of credit history or they have heard this: You need a good credit score to get a business loan. 

But what if you have never taken a loan before? Does that mean you can never build a credit score? 

This is one of the most common questions we hear at TallyCapital, especially from small business owners, traders, shopkeepers, and startups. 

So, let’s answer it clearly and honestly. 

 Yes, you can build a credit score even without taking a traditional loan. And this blog will explain how, in a simple and practical way. 

What Exactly Is a Credit Score & Why Does It Matter for Business Loans?  

Think of a credit score as your financial report card.  It’s just a number that shows how well you handle money and loans. 

In India, this score usually ranges from 300 to 900, which means the higher the score, the better. 

And that’s why lenders care about your credit score because a good score helps you get faster approval, lower interest rates, and a higher loan amount, while a low or zero score can delay approval, reduce the loan amount, or even lead to rejection. 

Ways to Build Credit Score Without Taking a Loan 

Taking a loan is not the only way to build a credit score and smart business owners can start building strong credit through credit cards, timely bill payments, and disciplined money habits even before applying for their first business loan. 

Let’s look at practical and legal methods that work in India. 

Use a Credit Card the Right Way 

A credit card is one of the easiest and safest ways to start building your credit score, especially if you don’t have any loan history. Every time you use it, the bank records your activity and shares it with credit bureaus like TransUnion CIBIL, Experian, Equifax, and CRIF High Mark. 

If you are applying for your first credit card, start with a basic entry-level card from your bank where you already have a savings or current account. If you don’t qualify, a secured credit card against a fixed deposit is a good and low-risk option to begin your credit journey. 

Paying your credit card bill on or before the due date shows that you borrow responsibly and repay on time. When you follow this habit consistently, banks begin to trust you more, and your credit score improves gradually. 

This is why experts suggest using only 30–40% of your credit limit. Lower usage shows financial control and discipline, while heavy usage can make you look overly dependent on credit. 

Example: 

• Your credit card limit is ₹50,000. 
• Safe usage is around ₹15,000–₹20,000. 
• You spend ₹18,000 on fuel, office items, and internet bills. 
• Before the due date, you pay ₹18,000 in full. 

What happens then? 

• No interest will be charged. 
• Your credit history becomes positive. 
• Your credit score slowly goes up. 

Pay Utility and Mobile Bills on Time

Many people ignore this, but late bill payments can quietly damage your financial profile. Paying postpaid mobile bills and electricity bills on time reflects financial discipline and responsible money management. While not every bill directly increases your credit score, missing or delaying these payments can still have a negative impact on it. 

Why this matters: 

If a bill goes unpaid for long, companies may report it or send it to collections and that affects your credit score. 

Example: 

You run a small office or shop: 

• Monthly electricity bill: ₹2,500 
• Postpaid mobile bill: ₹700 

So, if you pay all your regular bills before the due date every month, it reflects financial stability, responsibility, and clean money management. This consistent discipline plays a key role when you apply for a business later.

Buy Now, Pay Later (BNPL) – Use It Carefully

BNPL is basically like a mini loan. It lets you buy something immediately and pay later in monthly instalments, usually without any upfront payment. When you repay these instalments on time, it helps create a positive credit history. 

How BNPL helps your credit: 

• Some BNPL apps report your repayment behavior to credit bureaus (TransUnion CIBIL, Experian, Equifax, and CRIF High Mark). 
• Paying every instalment on time shows you are financially disciplined. 
• This can help start or improve your credit score. 

Example: 

You buy office headphones worth ₹3,000 using BNPL. 

• You select a 3-month no-cost repayment plan. 
• You pay ₹1,000 every month on time. 

This means lenders slowly start seeing you as someone who can manage small amounts of credit responsibly. With time, these good repayment habits add positive activity to your credit profile and build trust, all without you needing to take a big loan. 

Also remember: 

• Missing even one payment can reduce your credit score. 
• Using too many BNPL apps at the same time can make you look risky to lenders. 

Become an Authorized User on Someone Else’s Credit Card

If you are new to credit, this can be a helpful shortcut. A trusted family member or business partner can add you as an authorized user on their credit card, and you don’t need to apply separately for a new credit card. Their good payment history can help you start building your own credit profile. 

Example: 

If your spouse has a credit card limit of ₹1,00,000, pays all bills on time, and adds you as an authorized user, their good credit habits can positively reflect on your credit profile, even if you rarely use the card. 

So, choose someone responsible, as missed payments can affect your credit score too. This method is often used by first-time business owners before applying for loans.

Opening a Current Account & Keep It Active

A current account doesn’t directly increase your credit score, but for businesses, it is very important. Think of it as proof that your business is real and running properly. 

Why lenders care about your current account: 

• It shows money coming in and going out regularly. 
• It proves your business is active, not just on paper. 
• It helps lenders understand whether you can repay a loan or not. 

Example: 

Let’s say you run a small trading business. 

• Your customers pay you into your current account. 
• You use the same account to pay suppliers, rent, electricity, and other business expenses. 

After 6–12 months, your bank statements will show: 

• Regular income 
• Controlled expenses 
• Stable cash flow 

So, this means, when lenders see this, they trust your business more. Even if your credit history is new or limited, clean and active current account statements can improve your chances of getting a business loan. 

Avoid Common Mistakes That Damage Credit Score 

Building credit is a slow process, but damaging it won’t take time.  

There are few mistakes you can keep in mind to avoid any repercussions.  

Missing credit card due dates
If you forget to pay a ₹2,000 card bill, the bank charges a late fee and your credit score goes down.  

Paying only minimum amount
Let’s say, your total bill is ₹10,000 but you pay only ₹500 of Minimum Amount Due. The remaining amount keeps attracting interest, and your credit score will not improve. 

Applying for many loans/cards together
If you apply for 4–5 cards or loans in one month, banks may think you are under financial pressure and see you as risky. 

Ignoring old dues
Even a small unpaid amount like ₹1,200 from the past can create problems and stop your loan from getting approved later.  

Truth:
If you keep your record clean today, getting loans and credit in the future becomes much easier. 

How Long Does It Take to Build Credit Without Loans? 

This is not instant, and that is totally normal. 

Realistic timeline: 

• 3–6 months: Credit activity starts showing 
• 6–12 months: Score becomes stable 
• 12+ months: Strong enough for business loans 

Key takeaway: Don’t rush and be consistent. Even small, good habits, done every month can make a big difference. 

Why You Should Build Credit Before Taking a Business Loan 

Think of your credit score like the foundation of a building. If the foundation is strong, everything else becomes easier. 

When your credit score is good, lenders trust you more. That means: 

• Higher chances of loan approval – fewer rejections 
• Better loan terms – lower interest and flexible repayment 
• Faster processing – less waiting and fewer follow-ups 
• Less documentation stress – fewer questions and explanations 

So, if you are planning to take a business loan in the next 6 – 12 months, the best time to start building your credit is now, even if you are not taking any loan today. 

Final Thoughts: Is It Possible? 

Yes, absolutely. 

You can build a credit score without taking a loan and it’s actually a smart move. 

Only you have to- 

• Use your credit cards carefully. 
• Paying bills on time 
• Managing your money consistently 
• Avoiding common mistakes 

Indian business owners can create a strong and clean credit profile before applying for their first business loan. 

At TallyCapital, we believe in supporting businesses at every stage, whether you’re preparing today or ready for funding tomorrow.

FAQs

Can I build a credit score without taking a loan?
Yes. Credit cards, BNPL payments, and timely bill payments can help you build a credit score even without loans.

How long does it take to build credit score without loans?
Typically, 3–6 months for activity to appear and 6–12 months for a stable score.

Does paying electricity or mobile bills improve credit score?
Timely payments show financial discipline. Missed payments can hurt your score if reported or sent to collections.

Is BNPL safe for credit score building?
Yes, if used carefully. Timely repayments help, but missed payments or overuse can reduce your score.

What is a good credit score for business loans in India?
A score above 700 is generally considered good for business loan eligibility.

Every great business begins with a powerful idea. But turning that idea into a reality requires capital. For aspiring entrepreneurs in India, the journey from concept to company often starts with a critical question: “Where can I get the money to start my business?” Securing initial funding can feel like a major hurdle, but the landscape of startup funding options is more diverse and accessible than ever before. 

Navigating the world of finance doesn’t have to be intimidating. Understanding your choices is the first step toward making a smart decision for your new venture. This guide will walk you through the best startup funding options available in India, helping you find the right path to launch your dream. 

Exploring Your Startup Funding Options 

The right funding source depends on your business model, your stage of development, and your long-term goals. Some entrepreneurs prefer to maintain full ownership, while others are willing to trade equity for capital and mentorship. Let’s break down the most common avenues for financing your startup.

Traditional Bank Loans

For decades, banks have been the go-to source for business capital. They offer various types of loans, including term loans for large, one-time expenses and working capital loans to manage day-to-day operations. 

• How it works: You submit a detailed business plan, financial projections, and collateral to a bank. The bank assesses your creditworthiness and the viability of your business idea before approving the loan. 

• Benefits: Banks offer structured repayment schedules and allow you to retain full ownership of your company. The interest rates can be competitive if you have a strong credit history. 

• Challenges: The application process for business loans for startups in India can be long and demanding. Banks are often risk-averse and may require significant collateral or a proven track record, which most new startups don’t have.

Government Loan Schemes

The Indian government has launched several initiatives to promote entrepreneurship and support small businesses. These schemes are designed to provide financial assistance with favorable terms. 

• How it works: Programs like the Pradhan Mantri MUDRA Yojana (PMMY) and the Stand-Up India Scheme offer loans through various financial institutions. These schemes often have relaxed eligibility criteria and may not require collateral. 

• Benefits: Government schemes provide access to capital for those who might not qualify for traditional bank loans. They often come with lower interest rates and government-backed credit guarantees. 

• Challenges: The application process can still involve significant paperwork and bureaucratic steps. Awareness and accessibility of these schemes can also vary by region.

Venture Capital (VC) Funding

Venture capital firms are investment companies that provide capital to startups with high growth potential in exchange for an equity stake. They invest other people’s money from a fund and are looking for a significant return on their investment. 

• How it works: You pitch your business to a VC firm. If they are interested, they conduct extensive due diligence before investing. VCs typically invest larger sums of money in businesses that are ready to scale rapidly. 

• Benefits: Beyond just capital, VCs provide invaluable mentorship, industry connections, and strategic guidance to help you grow your business. 

• Challenges: Securing VC funding is highly competitive. Founders must give up a portion of their company ownership and control. VCs also expect aggressive growth and a clear exit strategy, like an IPO or acquisition.

Angel Investors

Angel investors are wealthy individuals who invest their own money in startups in exchange for equity. They often invest in industries they know well and can act as mentors. 

• How it works: Similar to VCs, you need to pitch your idea to angel investors or angel networks. They typically invest smaller amounts than VCs and often focus on very early-stage companies. 

• Benefits: Angel investors can be more flexible than VCs and often make decisions faster. They bring personal expertise and can open doors to valuable contacts. 

• Challenges: Finding the right angel investor who aligns with your vision can be difficult. Like with VCs, you will be diluting your ownership stake in the company. 

A Smarter Approach: TallyCapital Business Loans 

While traditional funding routes have their place, the modern business landscape demands faster, more flexible financing. Startups need capital quickly to seize opportunities and stay ahead. This is where modern startup financing solutions like TallyCapital come in. 

TallyCapital, from the house of TallyPrime, is designed to address the unique challenges faced by new businesses in India. It offers a simple, smart, and superior way to secure the funds you need without the complexities of traditional lending. 

How TallyCapital Simplifies Business Funding 

1. Fast and Easy Application:
   For a startup, time is the most valuable resource. TallyCapital streamlines the loan application process, moving away from piles of paperwork and long waiting periods. The digital-first approach ensures you can apply for funding quickly and get a decision faster, helping you act on business opportunities without delay. 
2. Flexible Financing Solutions:
   Every startup is different. TallyCapital understands that a one-size-fits-all approach doesn’t work. It provides access to flexible credit options tailored to your specific needs, whether you require funds for inventory, marketing, or hiring your first employees. 
3. Built on Trust and Transparency:
   Coming from Tally, a name trusted by millions of businesses, TallyCapital operates with transparency. There are no hidden fees or complicated terms. You get a clear understanding of your loan, helping you plan your finances with confidence. 
4. Designed for the Modern Entrepreneur:
   TallyCapital startup loans are built for the digital age. The solution leverages technology to assess your business and provide credit, making it one of the most accessible startup funding options for ambitious entrepreneurs across India.

Choosing the Right Path for Your Business 

Deciding where to get a loan to start your business is one of the most important decisions you’ll make. 

• If you have a strong business plan and collateral, a bank loan might be a good fit. 

• If your business aligns with social or economic development goals, explore government schemes. 

• If you have a high-growth, scalable idea and are ready to give up equity for expertise, VCs or angel investors are your best bet. 

• If you need fast, flexible, and hassle-free capital to get your business off the ground, TallyCapital offers a powerful solution. 

Ultimately, the best startup financing solution is one that aligns with your vision and empowers you to build your business on your own terms. By exploring all available avenues and leveraging modern tools, you can secure the capital you need to turn your entrepreneurial dream into a thriving success story. 

FAQs

Can I get a loan to start a business without collateral in India?
Yes, several government schemes and digital lenders offer startup loans without collateral, especially for MSMEs and first-time entrepreneurs.

Which is the best funding option for a new startup?
It depends on your needs. Bank loans suit structured businesses, VCs and angels suit high-growth startups, while digital platforms offer faster access to capital.

Are startup loans better than equity funding?
Startup loans allow founders to retain ownership, while equity funding provides mentorship but dilutes control. The right choice depends on growth goals.

How quickly can I get funding for my startup?
Traditional loans may take weeks, while modern digital lending solutions can offer approvals much faster with minimal paperwork.

What documents are required for a startup loan?
Typically, identity proof, business details, bank statements, and basic financial information are required. Requirements vary by lender.

Running a small business in India is not easy. Whether you own a shop, a manufacturing unit, a service company, or a startup, one thing remains common for all entrepreneurs – the need for timely finance. The right small business loan can help your business grow smoothly, while the wrong loan can create unnecessary financial pressure. 

As a business owner, you may need funds to manage daily expenses, buy new machinery, expand to a new location, or handle sudden cash shortages. Today, there are many loan options available for MSMEs in India, offered by banks, NBFCs, and digital lenders. While choices are good, too many options can also be confusing. 

This detailed guide explains different types of small business loans, how they work, and how Indian business owners can choose the best option based on their needs. 

Why Choosing the Right Small Business Loan Is Important 

Not all business loans are the same. Each loan type is created for a specific purpose. Some loans are suitable for long-term growth, while others are meant to solve short-term cash flow problems. 

Before applying for any loan, you should clearly understand: 

• Your business goal 
• Your monthly cash flow 
• How quickly do you need the money 
• How you plan to use the funds 

Choosing the wrong loan can increase interest costs, disturb cash flow, and add stress to your business. Choosing the right loan, on the other hand, can support steady growth and financial stability.

Type of Small Business Loans

Term Loans: Ideal for Long-Term Business Growth

A term loan is one of the most popular and traditional forms of business financing in India. Under this option, you receive a lump sum amount and repay it over a fixed period with interest. 

How Term Loans Work 

Once your loan is approved, the full amount is credited to your account. You repay it in monthly EMIs over a fixed tenure, which may range from 1 year to 5 years or more. Interest rates depend on your credit score, business turnover, and financial history. 

Best Uses of Term Loans 

• Expanding your business 
• Buying commercial property 
• Purchasing machinery or equipment 
• Opening a new branch 

Pros 

• Fixed and predictable EMIs 
• Suitable for large investments 
• Generally lower interest rates than short-term loans 

Cons 

• Approval process may take time 
• Requires good financial records and credit history 

If your aim is long-term growth and stability, a term loan can be a reliable option.

Working Capital Loans: Managing Daily Business Expenses

Working capital loans are designed to help businesses manage day-to-day operational expenses. These loans are very useful for Indian MSMEs that face seasonal demand or delayed customer payments. 

How Working Capital Loans Work 

These loans are usually short-term. The funds are disbursed quickly and are meant to support regular business operations rather than asset purchases. 

Best Uses of Working Capital Loans 

• Paying salaries and wages 
• Rent, electricity, and utility bills 
• Buying inventory or raw materials 
• Marketing and advertising expenses 

Pros 

• Quick access to funds 
• Helps manage cash flow gaps 
• Short commitment period 

Cons 

• Higher interest rates 
• Short repayment tenure 

Working capital loans are ideal if your business income fluctuates or if you need funds to keep operations running smoothly.

Business Line of Credit: Flexible Funding Option

A business line of credit offers maximum flexibility. Instead of receiving the entire amount at once, you get access to a credit limit and withdraw money only when required. 

How a Business Line of Credit Works 

You are approved for a fixed limit. You can withdraw any amount within that limit and pay interest only on the amount used. Once you repay, the limit becomes available again. 

Best Uses of Business Line of Credit 

• Handling unexpected expenses 
• Emergency repairs 
• Short-term cash flow needs 

Pros 

• Very flexible 
• Interest charged only on used amount 
• Funds can be reused 

Cons 

• Interest rates may vary 
• Requires disciplined financial management 

For businesses with uncertain or irregular expenses, a line of credit acts like a financial safety net. 

Equipment Financing: Buy Machinery Without Cash Stress

Equipment financing is a loan taken specifically to purchase business-related equipment. In most cases, the equipment itself is used as collateral. 

How Equipment Financing Works 

Because the lender has security in the form of equipment, approval is often faster and interest rates are lower compared to unsecured loans. 

Best Uses of Equipment Financing 

• Manufacturing machinery 
• Construction tools 
• Office computers and technology 
• Commercial vehicles 

Pros 

• Lower interest rates 
• Does not disturb working capital 
• Ownership of equipment 

Cons 

• Can be used only for equipment purchase 
• Risk of asset seizure if EMIs are missed 

This option is suitable when you want to upgrade assets without affecting daily business cash flow. 

Invoice Financing: Unlocking Money Stuck in Unpaid Bills

Many Indian businesses, especially B2B companies, face delayed payments from customers. Invoice financing helps you access funds against unpaid invoices. 

How Invoice Financing Works 

You receive a percentage of the invoice value upfront. Once the customer pays the invoice, the remaining amount is released after deducting fees. 

Best Uses of Invoice Financing 

• Improving cash flow 
• Paying suppliers 
• Managing delayed client payments 

Pros 

• Quick access to funds 
• No need for traditional collateral 
• Credit scores are less important 

Cons 

• Higher service fees 
• Depends on customer payment behavior 

Invoice financing is very useful for businesses dealing with large clients and long payment cycles. 

How to Choose the Right Small Business Loan 

Before selecting a loan, ask yourself these important questions: 

1. Why do I need the loan? Growth, daily operations, or emergency needs?
2. How fast do I need the funds? Some loans are approved faster than others.
3. Can I comfortably repay the loan? EMI should match your cash flow.
4. Do I need flexibility or fixed structure? Lines of credit offer flexibility, term loans offer stability. 

Choosing a loan that matches your business purpose is the key to healthy financial planning. 

How TallyCapital Helps You Choose the Right Loan 

At TallyCapital, we understand that every business is different. There is no one-size-fits-all solution when it comes to financing. Our team carefully evaluates your business goals, cash flow, and future plans before suggesting a loan option. 

We will help you. 

• Select the most suitable loan type 
• Understand interest rates and repayment terms 
• Avoid unnecessary financial burden 

Our aim is simple – to make finance work for your business growth, not against it. 

 Final Thoughts 

Understanding different types of small business loans gives you the power to make smart financial decisions. Whether you want to expand your business, manage daily expenses, or handle delayed payments, the right loan can be a strong support system. 

When chosen wisely and with the right guidance, business loans become a growth tool, not a financial obstacle. With proper planning and expert advice, Indian entrepreneurs can confidently take the next step in their business journey.

FAQs

Q1. What are the most common types of small business loans in India?
Term loans, working capital loans, business lines of credit, equipment financing, and invoice financing are the most common options.

Q2. Which loan is best for managing daily business expenses?
Working capital loans are best for handling salaries, rent, inventory, and other operational expenses.

Q3. Are small business loans available without collateral?
Yes, many NBFCs and digital lenders offer unsecured MSME loans based on cash flow and credit history.

Q4. How do I choose the right loan for my business?
Consider your purpose, cash flow, urgency, repayment capacity, and whether you need flexibility or fixed EMIs.

Q5. Can startups apply for small business loans in India?
Yes, startups can apply, though eligibility depends on business vintage, turnover, and financial records.

Managing your business finances involves tracking every rupee that comes in and goes out. When you take a loan to fund your operations or expansion, you might wonder how the repayments fit into your account. A common question among business owners is: Is loan repayment a business expense? This is a crucial question, as the answer directly impacts your taxable income. Let’s explore the details of loan repayments and their tax implications for Indian businesses. 

The short answer is nuanced. While the entire loan repayment amount is not considered a business expense, a significant part of it is. Understanding this distinction is key to accurate financial reporting and maximizing your tax benefits. 

Understanding Loan Repayment Components 

Loan repayment is typically made through Equated Monthly Installments (EMIs). Each EMI has two main components: 

1. Principal Repayment: This is the portion of the payment that goes towards reducing the original loan amount you borrowed. 
2. Interest Payment: This is the cost of borrowing the money paid to the lender for their service. 

For tax purposes, Indian tax laws treat these two components very differently. 

Which Part of a Loan Repayment is a Business Expense? 

According to the Income Tax Act, only the interest paid on a business loan is considered a deductible business expenditure. You can claim this interest amount as an expense in your profit and loss statement. This reduces your net profit and, consequently, your overall tax liability. 

The principal repayment, on the other hand, is not treated as a business expense. It is considered a capital expenditure because it reduces liability on your balance sheet. Since the initial loan amount, you received was not taxed as income; its repayment cannot be claimed as an expense. 

Think of it this way: the loan principal is a liability you are paying off, not an operational cost of running your business. The interest, however, is the cost incurred for using the funds, making it a legitimate operational expense. 

Maximizing Your Business Loan Tax Benefits 

To take full advantage of the tax benefits on a business loan, meticulous record-keeping is essential. You need to clearly separate the interest and principal components of your repayments throughout the financial year. 

Here’s how you can claim the deduction: 

• Proper Documentation: Keep all loan agreements and statements from your lender. These documents will clearly show the breakdown of your EMI payments into principal and interest. 

• Accurate Accounting: When recording loan repayments in your books, put the interest portion to an “Interest Expense” account and the principal portion to the “Loan Liability” account. 

• Claiming in ITR: While filing your Income Tax Return (ITR), the total interest paid during the financial year can be claimed as a deduction under “Business Expenses.” 

This simple practice ensures you are compliant with tax laws and are not overpaying your taxes. The savings can be significant, freeing up capital for other critical business needs. 

Streamlining Your Business Financing with TallyCapital 

Securing and managing business finance can be complex. The application process can be lengthy, and tracking repayments requires careful attention to detail. This is where a modern, simplified financing solution can make a huge difference. 

TallyCapital, a financing solution from the house of TallyPrime, is designed to make financing simpler, smarter, and superior for businesses like yours. Understanding the challenges business owners face, TallyCapital offers a seamless way to access funds and manage them efficiently. 

How does TallyCapital simplify the process? 

• Easy Access to Funds: TallyCapital provides a complete digital application process, enabling you to secure the capital you need without unnecessary hurdles. 

• Flexible Solutions: It offers financing options tailored to your business needs, whether you need working capital, funds for expansion, or money to purchase new equipment. 

The Bottom Line 

So, is loan repayment a business expense? Only the interest part is. The principal repayment is not. By understanding this rule, you can correctly manage your books, optimize your tax strategy, and improve your company’s financial health. 

For businesses looking to grow, leveraging business loans is a powerful strategy. And with TallyCapital, accessing and managing that finance becomes a much smoother journey. You can focus more on running your business, confident that your financial management is built on a solid and smart foundation. 

Frequently Asked Questions (FAQs) 

Q1: What part of a business loan repayment is tax-deductible in India?
In India, only the interest portion of your business loan repayment is tax-deductible. You can claim it as a business expense under Section 37(1) of the Income Tax Act. The principal amount you repay is not deductible. 

Q2: Is the entire EMI on a business loan a deductible expense?
No, the entire EMI is not a deductible expense. The EMI consists of both principal and interest. Only the interest component can be claimed as an expense to reduce your taxable income. 

Q3: How do I prove the interest paid on my business loan for tax purposes?
You can prove the interest paid by using the loan statements provided by your lender. These statements provide a clear amortization schedule, breaking each EMI into its principal and interest components. Keep these documents for your records and for filing your tax returns. 

Q4: Can I claim tax benefits on a personal loan used for business purposes?
Yes, if you can prove that the funds from a personal loan were used exclusively for business purposes, you can claim the interest paid on that loan as a business expense. It is crucial to maintain clear records demonstrating how the funds were utilized in the business. 

Q5: How does TallyCapital support businesses?
TallyCapital provides simple, smart, and superior financing solutions for businesses. It simplifies the process of getting business loans by offering an easy application process and flexible credit options. 

Many business owners use credit cards or short-term credit to manage everyday expenses. It helps maintain smooth cash flow, especially during busy or slow seasons. But one question often comes up.
Does paying only the minimum amount affect your credit score 

Your credit score is one of the most important indicators of your financial health. It can influence your loan eligibility and the interest rates offered by lenders. In this blog, we will explain how minimum payments work, whether they impact your score and how you can maintain a strong credit profile. This guide is simple, practical and designed to help you make better financial decisions for your business. 

Understanding the Minimum Payment Concept 

When you receive your credit card bill, the total outstanding amount may seem high at times. To give you flexibility, banks allow a minimum amount to be paid. This is usually around five percent of your total bill. Paying only this amount keeps your account active and avoids late payment penalties. 

It may look convenient, but it comes with important consequences. 

Does Minimum Payment Affect Your Credit Score 

The short answer is yes and no. Paying the minimum amount does not directly reduce your credit score. As long as you pay this amount on time, your bank will not report your account as overdue. 

However, paying only the minimum can create situations that harm your score in the long run. 

Here is how it really affects your credit health.

Higher credit utilization

When you pay only the minimum, your outstanding balance remains high. This increases your credit utilization ratio.

Credit utilization means how much credit you are using compared to your total limit. Experts suggest keeping it below 30 percent. A high utilization ratio signals financial stress and can reduce your credit score.

Slow reduction of outstanding amount

Minimum payments barely reduce your actual balance. This means your debt remains high for a long time. High outstanding amounts can negatively impact your score.

Higher interest charges

Banks charge interest on the unpaid amount. As interest builds up every month, your balance may increase instead of decreasing. This can lead to delayed payments later which will definitely affect your credit score.

Increased chance of missed payments

When your balance becomes too high, it becomes harder to pay future bills.  A single missed or late payment may hurt your credit score significantly.

Long term financial stress

Continually paying only minimum amounts keeps your card in a revolving debt cycle. This can affect your overall ability to borrow, including business loans. 

So, while paying the minimum amount protects you from late payment fees, it does not protect your credit score in the long term. 

Do Late Payments Affect Credit Score 

Yes. Late payments have one of the strongest impacts on your credit score. If you delay your payment by more than 30 days, it is usually reported to credit bureaus. This record stays on your credit report for many months. 

A single late payment can affect your ability to get: 

• Business loans 
• Credit card limit increases 
• Better interest rates 
• Working capital loans 

Late payments also create trust issues for lenders who are evaluating your repayment discipline. 

Minimum Payment vs Full Payment 

Here is a simple table to help you understand the difference. 

How Minimum Payments Impact Business Owners 

For many small and medium businesses, credit cards act as a financial cushion. When sales are slow, paying only the minimum feels comfortable. But long-term reliance on minimum payments can lead to: 

• Higher borrowing costs 
• Difficulty taking new business loans 
• Lower credit score 
• Reduced lender confidence 
• Cash flow pressure due to rising interest 

If you are planning to apply for a business loan soon, it is always better to maintain a low outstanding balance. 

How to Improve My Credit Score 

Improving your score is not complicated. It only requires consistency. Here are simple and effective steps you can follow.

Always pay EMIs and card bills on time – Payment history has the highest impact on your credit score.

Try to pay more than the minimum amount – Even paying half or two thirds of your total bill is better than paying only the minimum.

Maintain low credit utilization – Keep your usage below 30 percent of your total limit. This is one of the easiest ways to improve your credit score.

Avoid applying for too many loans together – Each loan application creates a hard inquiry. Too many inquiries can reduce your score.

Check your credit report regularly – Sometimes there are errors in your report such as old accounts shown as active or incorrect late payments. Correcting these can improve your score instantly.

Keep old credit accounts active – A longer credit history looks positive.

Maintain a mix of secured and unsecured loans – A balanced credit mix shows that you can handle different types of credit responsibly. 

How Long Does It Take to Improve Your Credit Score 

If you consistently follow these steps, you may start seeing improvements within three to six months.
If you have serious issues like defaults, the recovery may take longer. But lenders always appreciate steady repayment behavior. 

How TallyCapital Helps You to Build Better Credit Health 

TallyCapital is created to bring simple, smart and superior financing to business owners using TallyPrime. It helps you manage your credit health better by giving you: 

• Instant credit score checks with insights 
• Access to business loans with the best interest rates 
• Personalized offers from trusted lending partners 
• Quick approval with minimal documentation 
• A completely secure and transparent process 

You can access TallyCapital directly inside TallyPrime and check your loan eligibility in minutes. 

Final Thoughts 

Paying only the minimum amount on your credit card does not damage your credit score immediately. But it creates situations that can harm your score over time, such as high utilization, growing interest and increased chances of late payments. 

If you want a strong credit score and better loan opportunities, try to pay more than the minimum amount. Focus on timely payments and smart credit usage. 

With tools like TallyCapital, you can easily track your credit score, understand your credit health and access the right business loan at the right time.

FAQs

Q1. Does paying only the minimum amount affect credit score?

Paying the minimum amount does not immediately reduce your score, but it increases credit utilization and interest, both of which can harm your score over time.

Q2. What happens if I keep paying only the minimum amount?

Your outstanding balance stays high, interest continues to grow, and your utilization percentage may increase, leading to a gradual drop in your credit score.

Q3. Does minimum payment count as an on-time payment?

Yes. Minimum payment counts as on-time and prevents late fees. But the remaining balance still attracts interest.

Q4. How does credit utilization impact my credit score?

High credit utilization (above 30%) is viewed negatively by lenders and can reduce your score significantly.

Q5. Do late payments affect credit score?

Yes. Late payments have one of the strongest negative impacts and can stay on your report for several months.

Q6. Can paying more than the minimum improve my credit score?

Absolutely. Paying in full or paying more than the minimum, keeps your balance low and helps improve your score faster.

Many business owners feel nervous about checking their credit score because they assume it will lower their score. This idea is very common and often stops people from understanding their credit health or preparing for a business loan. 

So does your credit score go down if you check it? The simple answer is no. 

Checking your own credit score does not reduce your credit score in any way. You can check it as many times as you want without any negative impact. 

In this guide, we will explain why your score stays safe, how credit checks work, and how you can check your score easily using Tally Capital. 

Why People Think Checking Their Score Reduces It 

Most people confuse two different types of credit checks. One is harmless and the other can temporarily affect your score. Because of this confusion, many believe every check is risky. 

To understand this better, you need to know the two types of credit enquiries. 

Types of Credit Enquiries 

Credit enquiries are of two types. Each one has a different impact on your credit score. 

Soft enquiry 

A soft enquiry happens when you check your own score. It also happens when a lender checks your score for pre-approved offers without you applying for a loan.
A soft enquiry does not reduce your credit score. 

Hard enquiry 

A hard enquiry happens when you apply for a loan or credit card. The lender checks your report as part of the approval process. A hard inquiry can reduce your score slightly. 

This is the main reason people get confused. They assume the soft enquiry used for checking their personal score will have the same effect as a hard enquiry used when applying for credit. 

So checking your score through Tally Capital or from any credit bureau website does not harm your score. 

How Does a Hard Enquiry Affect the Score 

A hard enquiry may bring down your score a little because it shows you are actively looking for credit. Lenders do not want too many applications within a short period because it may indicate financial stress. 

However, the drop is usually small and temporary. If you pay your EMIs on time and maintain healthy credit usage, your score recovers quickly.

Why Checking Your Score Regularly Is Actually Good 

Instead of reducing your score, checking your credit score regularly can actually help you in many ways. Here is why it is useful. 

You get early warning signs 

If there is any issue such as a late payment or unexpected fall in your score, you can fix it before applying for a loan. 

You can track your improvement 

Regular checks show whether your habits are improving your score or pulling it down. 

You can spot errors 

Sometimes banks may report wrong information by mistake. If you check your score regularly, you can quickly report errors and correct them. 

You can prepare before applying for a loan 

If you know your score is low, you can improve it first. This increases your chances of loan approval. 

You stay financially aware 

Knowing your score gives you a clear picture of your financial discipline. 

How Does Credit Score Work When You Apply for a Loan 

When you apply for a business loan, lenders look at many factors, and your credit score is one of the first checks. Your repayment history, credit usage, past behavior and stability are all reflected in your credit score. 

A good score helps you: 

• Get loan approval faster 
• Receive better interest rates 
• Qualify for a higher loan amount 
• Experience a smoother application process 

A low score may lead to loan rejection or strict repayment terms. That is why knowing your score early is always beneficial. 

How to Check Credit Score Safely Without Any Impact 

There are many ways to check your score, but the safest and easiest method for business owners is through TallyCapital. 

You can check your credit score directly inside your TallyPrime platform with just a few details. It is fast, secure and has no impact on your score because it is a soft inquiry. 

You can also check your score on the TallyCapital website in a few simple steps: 

• Enter basic details like name, mobile number, email and PAN 
• Verify your mobile number 
• Get your complete credit score and insights instantly 

Since this is a self-check, it does not lower your credit score. 

What Does Not Affect Your Credit Score When You Check It 

Here is a quick list of what will not lower your credit score. 

• Checking your own credit score 
• Checking your credit score multiple times 
• Receiving pre-approved loan offers 
• Getting your score from credit bureau websites 
• Getting your score from Tally Capital 
• Viewing your loan eligibility 

These are all soft enquiries and have no negative effect. 

What Actually Affects Your Credit Score 

To avoid confusion, here are the things that actually lower your score. 

• Missing EMIs 
• Delayed payments 
• Using too much credit 
• Applying for many loans at once 
• Defaulting or settling loans 
• Having high outstanding balances Frequent hard enquiries 

Understanding this difference helps you use credit more wisely. 

Why TallyCapital Makes Checking Your Score Easier 

TallyCapital is designed for TallyPrime users who want fast financing and clear insights. It offers a secure way to check your credit score without harming it. 

You also get: 

• Easy credit score insights 
• Business loan eligibility check 
• Best loan offers from trusted lending partners 
• Smooth application with minimal documentation
• Fast approval and direct fund transfer 

This makes loan planning simple for small and medium businesses. 

Final Thoughts 

Checking your credit score does not reduce it. This is one of the biggest myths in the world of finance. A self-check is always a soft enquiry and has absolutely zero impact on your score. 

In fact, checking your score regularly is a smart habit. It helps you stay informed, catch errors early and prepare for future business loans with confidence. 

With TallyCapital, you can check your credit score safely and quickly right inside TallyPrime. It is simple, accurate and designed to help your business borrow better.

Every business needs funds at some point. You may want to buy more stock, expand operations, manage cash flow or grab a new opportunity. Whatever the reason, your credit score plays an important role when you apply for a loan.

But what is a credit score? How credit score works? Why do lenders check it before offering a business loan? And how can you know your credit score in a simple way.

At TallyCapital, we simplify complex credit concepts so business owners can clearly understand what lenders look for and how to improve their chances of loan approval.

What is a Credit Score

A credit score is a three-digit number that indicates how trustworthy you are as a borrower. It tells the lender how likely you are to repay a loan on time. Think of it as your financial report card.

In India, the score usually ranges from 300 to 900.

• A higher score shows strong credit behaviour
• A lower score shows a higher risk

If you want easy loan approval, a smooth borrowing experience, and better interest rates, keeping a good credit score helps.

Who Calculates Your Credit Score

Your credit score is created by licensed credit bureaus. Banks and lenders share your credit information with these bureaus, and they calculate your score based on your repayment behaviour.

The four major credit bureaus in India are:

• CRIF High Mark
• TransUnion CIBIL
• Experian
• Equifax
  

Each bureau has its own method of calculation but they all look at similar data such as how you repay loans, how much credit you use and how frequently you apply for new credit. Lenders pull your score from one or more of these bureaus whenever you apply for a loan.

How Does Credit Score Work

Credit scoring is essentially a statistical, risk-evaluation exercise. Lenders or credit bureaus assess a borrower’s credit history using several key factors and each factor reflects a different aspect of borrowing behaviour. Then, using a proprietary algorithm or model, they combine the factors to produce a three-digit score (in India usually between 300 and 900). 

Here’s a breakdown of these factors and how they influence your credit score:

Repayment history

This is the most important factor. If you pay all your EMIs and credit card bills on time, your score stays healthy. If you delay or miss payments, your score drops.

Credit usage

This shows how much of your available credit you use. For example, if you have a credit card limit of ₹1,00,000 and you use around ₹80,000 every month, your utilization is 80 percent which is considered high. Experts suggest using less than 30 percent of your credit limit.

Length of credit

If you have been using credit for many years and have a stable record, it increases your score. A long and clean history shows reliability.

Type of credit

A healthy mix of secured loans such as business loans or auto loans and unsecured credit such as credit cards shows responsible borrowing behavior.

Number of loan enquiries

Every time you apply for a loan, lenders check your credit report. Too many such checks in a short time may show that you are credit hungry which can reduce your score.

Factors That Influence the Score at a Glance

Here is a quick table to make it easier to understand.

Why Credit Score Matters for Business Loans

When you apply for a business loan, lenders want to understand one thing.
Are you a safe borrower?

Your credit score helps them decide that. Here is why it is important.

• Banks approve loans faster when your score is good
• You get better interest rates
• You can qualify for a larger loan amount
• Lenders trust you more
• Your application process becomes smoother

Even if your business has good revenue, a low score may create hurdles in loan approval.

How to Know Credit Score Easily

There are many ways to check your score but the simplest option for business owners is through TallyCapital.

You can check your credit score directly inside the TallyPrime platform and get clear insights about your credit health.

You can also check your score on the TallyCapital website by entering basic details like name, mobile number, email and PAN. This helps you understand where you stand before applying for a loan.

Other ways include checking through credit bureau websites, but TallyCapital makes the entire experience faster and easier.

What Can Reduce Your Credit Score

Even small mistakes can affect your score. Some common reasons are:

• Missing EMIs
• Delayed bill payments
• Paying only the minimum amount on credit cards
• Using almost your full credit limit every month
• Applying for too many loans
• Closing old accounts suddenly
• Defaulting or settling old loans

Understanding these habits can help you avoid score drops in the future.

How to Improve Your Credit Score

Improving a credit score is not difficult. It requires steady behaviour and regular checkups.

Here are simple steps you can start today.

• Pay all EMIs and credit card bills before the due date
• Keep your credit usage within thirty percent
• Avoid applying for many loans at the same time
• Check your credit report regularly for errors
• Do not close old credit accounts unless necessary
• Maintain a mix of secured and unsecured loans
• Use auto payment reminders to avoid missed EMIs

Most scores begin to improve within three to six months if you follow these habits.

Personal Score and Business Score

Many small business owners use the same financial identity for both personal and business purposes. Because of this, lenders often check both your personal credit score and your business credit score.

A business credit score is affected by:

• Age of the business
• Business registration details
• Revenue patterns
• Existing business loans
• Payments to suppliers and vendors
• Consistency of transactions
• Owner or partner credit history

Both scores matter for loan approval especially for MSME and small businesses.

TallyCapital Makes the Loan Journey Simpler

TallyCapital is built for TallyPrime users who want fast and trusted business financing. It brings simple, smart and superior lending inside your Tally software so you can access funds without jumping between multiple platforms.

Here is how it works in four easy steps.

Check eligibility

You get instant insights about your loan eligibility and credit strength.

Apply with a few clicks

A simple and smooth application process within your trusted TallyPrime with minimal paperwork.

Quick approval

Fast decisions from multiple trusted lending partners.

Funds transferred directly

The loan amount is sent straight to your business account.

TallyCapital does not look only at your credit score. It also considers your business data in TallyPrime, which helps lenders take a fair and complete decision. This makes it possible for even a business with a moderate score to receive suitable loan options.

Why Businesses Prefer TallyCapital

• Smart credit score insights
• Multiple lending partners for better offers
• Access from your trusted TallyPrime platform
• Safe and transparent loan process
• Faster approvals with minimal effort

This helps businesses grow without stress or delays.

Final Thoughts

Your credit score is an important part of your financial journey. It affects how easily you can get loans and how much you pay in interest. Understanding how credit score works and how to know your credit score gives you the power to make better financial decisions.

With TallyCapital, you can check your score, get insights and access loan offers all from one trusted place. This makes financing simpler, smarter and more supportive for your business.

FAQs on How Credit Score Work

Q1. How is credit score calculated for business owners?
A credit score is calculated using repayment history, credit usage, credit mix, length of credit history and loan enquiries.

Q2. What is a good credit score for getting a business loan?
A score of 700+ is ideal for fast approvals and better interest rates, but lenders may offer loans even with moderate scores depending on your business data.

Q3. Does checking my own credit score reduce it?
No. Checking your score through TallyCapital is a soft enquiry and does not impact your score.

Q4. How long does it take to improve a credit score?
Most business owners see improvement within 3–6 months with consistent repayment and controlled credit usage.

Q5. Can I get a business loan with a low credit score?
Yes, depending on lender policies. TallyCapital also evaluates business data in TallyPrime, giving a more complete picture.