How to Check Your Business Credit Score and Why it Matters: A Complete Guide for Indian Businesses

Whether you are a new entrepreneur, a small business owner, or someone managing an established company, knowing how to check and improve your business credit score is a skill you cannot ignore. This three-digit number holds the key to unlocking numerous opportunities for your company, from securing favourable loans to negotiating better terms with suppliers.

In this comprehensive guide, you will explore in detail business credit score, why it matters, how to check it, and step-by-step strategies to boost it. Let’s embark on a journey to demystify this crucial aspect of business finance.

What is a business credit score?

A business credit score is a numerical value that reflects your company’s financial trustworthiness. It helps lenders, suppliers, and other business partners determine how likely you are to meet your financial commitments. Think of it as your business’s financial report card, showcasing how responsibly you’ve managed credit in the past and predicting how likely you are to meet your future financial obligations.

Let’s understand through an example:

Imagine you’re surrounded by colourful stalls and the buzz of commerce. Each vendor has a reputation – some are known for their quality products and fair dealings, while others are not so much. In business finance, your credit score is that reputation, represented by a number.

Just as an individual’s credit score can affect their ability to get a mortgage or a credit card, a business credit score can influence whether your company can secure financing, negotiate better terms, and manage cash flow effectively. This score provides a snapshot of your business’s credit history and summarises how you handle debts, pay bills and how you deal with financial responsibilities. 

The higher the score, the better the business’s financial health. Better financing opportunities, lower interest rates, and stronger supplier relationships exist. On the contrary, a poor business credit score means a financial risk that may pose challenges in obtaining loans or negotiating a good deal for your company.

In India, business credit scores usually range from 300 to 900, with higher scores indicating better creditworthiness:

• 750-900: Excellent – Faster loan approvals and lower interest rates.
• 650-749: Good – Reasonable chances of loan approval with fair terms.
• 550-649: Fair – Loan approvals may be harder, and interest rates could be higher.
• Below 550: Poor – High rejection risk or very stringent loan conditions.

Business credit score vs. personal credit score

It is important to note that your business credit score is different from your personal credit score. While personal credit scores are linked to an individual’s financial behaviour, business credit scores are tied to the company’s financial activities

• Personal credit scores are tracked by Permanent Account Number (PAN) and Aadhaar.
• business credit scores are tracked through Company Identification Number (CIN), PAN (for proprietorships/partnerships), and GSTIN.

Why your business credit score matters in India

In the dynamic Indian market, where competition is fierce and opportunities abound, a strong business credit score can be your ticket to success. Here are five key reasons why it matters:

1. Access to better financing

Banks and financial institutions in India use your business credit score to assess risk when considering loan applications. A higher score can lead to more favourable interest rates and terms. In a country where MSMES often struggle with financing, this can be a game-changer.

In 2020, PharmEasy, an Indian health-tech startup, used its strong credit profile to secure funding during the COVID-19 crisis, enabling it to meet rising demand.

2. Improved supplier relationships

Many suppliers check business credit scores before offering trade credit. A good score can help you negotiate better payment terms and discounts, crucial in managing cash flow.

A textile manufacturer in Surat improved its credit score and negotiated a 2% reduction in loan interest, saving ₹10 lakhs annually.

3. Enhanced credibility

In a country where trust is paramount in business dealings, a strong credit score serves as a badge of financial responsibility, potentially opening doors to new partnerships and opportunities.

A Chennai-based electronics firm secured 60-day credit terms from its suppliers after presenting a high credit score, improving cash flow during peak seasons.

4. Attracting investors and business partners

Investors assess your business’s financial health before investing. A strong credit score signals responsible management and can make your company more attractive for funding.

Nykaa, India’s leading beauty and wellness brand, leveraged its solid financial track record to secure private equity investments before its successful IPO.

5. Faster growth

With better access to credit and favourable terms, businesses can seize growth opportunities more readily, which is crucial in India’s rapidly evolving economic landscape.

The credit score check: A step-by-step guide for Indian businesses

Monitoring your business credit score is crucial to maintaining financial health. Now that we understand the importance of a business credit score let us explore how you can check yours. In India, there are several ways to conduct a company credit check:

1. Credit Information Companies (CICs)

India has four primary credit bureaus that provide business credit reports:

• CIBIL (Trans Union CIBIL)
• Equifax
• Experian
• CRIF High Mark

To check your score through these agencies:

2. Visit their official websites
3. Navigate to the business credit score section
4. Fill out the required information about your company
5. Pay the requisite fee (prices vary by agency)
6. Receive your credit report

2. Online financial platforms

Several online platforms in India offer business credit score check as part of their services. These often provide a more user-friendly interface and additional insights. Some of these platforms are:

• TallyCapital
• Credit Mantri
• Paisabazaar

3. Banks and financial institutions

If you have an existing relationship with a bank or financial institution, they may provide your business credit score as part of their services. Some banks offer this information through their online banking portals or mobile apps.

4. Government portals

The Ministry of Micro, Small, and Medium Enterprises (MSME) in India has initiatives to help businesses understand their credit profiles. Check the official MSME website for resources and tools related to business credit assessments.

How to improve your business credit score?

Improving your business credit score is a gradual process requiring financial discipline. There are several strategies you can employ to improve your business credit score: 

1. Pay bills on time: Timely payments are crucial. Set up automatic payments or reminders to ensure you never miss a due date.
2. Maintain low credit utilisation: Try to use less than 30% of your available credit. This shows responsible credit management.
3. Build credit history: Start small with trade credit from suppliers and gradually build your credit profile.
4. Monitor your score regularly: Regular checks can help you spot and address issues quickly. Many credit bureaus offer monitoring services.
5. Separate personal and business finances: Ensure your business has its own bank accounts and credit lines, separate from your personal finances.
6. Dispute inaccuracies: If you spot errors in your credit report, file disputes with the relevant credit bureaus promptly.
7. Diversify your credit: Having a mix of credit types (e.g., term loans, lines of credit) can positively impact your score

Real-world impact: A tale of two Indian businesses

To illustrate the real-world impact of business credit scores in India, let us consider the stories of two fictional small businesses:

Sharma Electronics: The power of a strong score

Rajesh Sharma runs a small electronics store in Pune. When he started his business, he made a conscious effort to build a strong credit profile. He paid suppliers on time, maintained low balances on his business credit card, and regularly checked his business credit score.

When the opportunity arose to expand his store, Rajesh applied for a business loan. Thanks to his excellent credit score of 780, he secured a 20 lakh loan at a competitive interest rate of 9% per annum. This allowed him to open another branch, significantly boosting his revenue.

Gupta Textiles: The struggle with poor credit

Priya Gupta’s textile business in Ahmedabad faced challenges due to a low credit score. Early financial struggles led to late payments and high credit utilisation, resulting in a score of 520.

When Priya tried to secure inventory financing to meet a large order, she was either rejected by lenders or offered loans with interest rates as high as 18%. This made it difficult for her to capitalise on growth opportunities and compete effectively in the market.

These contrasting stories highlight how a business credit score can significantly impact a company’s growth trajectory in the Indian market.

Why partner with TallyCapital?

At TallyCapital, we simplify credit management for businesses. Whether you need a business loan or want to improve your credit score, we provide:

• Wide lender network – Access to the best Indian banks and NBFCs.
• Streamlined processes – Quick and efficient loan approvals.

Conclusion

Your business credit score is more than a number—it is a powerful tool that can unlock growth opportunities for your business. By regularly checking your credit score and adopting responsible financial practices, you pave the way for easier financing, better partnerships, and long-term success. 

Don’t wait for a funding emergency—check your business credit score today with TallyCapital and take control of your business’s financial future.