Business credit reports are used widely by lenders to assess an applicant’s creditworthiness. Business credit reports offer all business-related information like past credit payments, loan history, credit utilization ratio, etc. In this article, let’s look at the types of business credit reports and their importance in India.

Types of Business Credit Reports in India

Commercial Credit Information Report - 

A Commercial Credit Information Report (CCIR) provides an in-depth analysis of a company's financial and credit history. This report is generated by credit information companies like CRIF High Mark, Experian, Equifax, and CIBILTM. It contains information such as the company's credit score, credit limit, outstanding loans, and payment history. The CCIR is an essential tool used by lenders, suppliers, and other business partners to assess a company's creditworthiness.

For a better understanding, let us try to analyze the CCIR prepared by CIBILTM. It provides a credit score that ranges between 300-900. Businesses also need to apply for loans and that is where lenders check the credit score to assess the creditworthiness of the business.

Components of a Commercial Credit Information Report

Below are the typical components of a commercial credit information report –

  1. Report order details - It can be seen at the top of your report and comprises information like the member, report order number, and application reference number.
  2. Enquiry information – This gives information about the company name and address, identification code, etc.
  3. Borrower profile – The borrower profile can be seen in 4 sections –
    1. Borrower details – You can find details like business category, class of activity, borrower’s name, legal constitution, industry type, etc.
    2. Address and contact details – Here you will find details about the company address and phone numbers, etc.
    3. Identification details – It has the company’s PAN details, registration number, etc.
    4. Delinquencies reported on the borrower – This provides the payment status, and guarantors of the company in the last 24 months.
  4. Rank - In this area, your credit rank name, credit rank—which normally runs from 1 to 10—and ranking factors are displayed.
  5. Credit profile summary - It displays credit opportunities provided by a variety of organizations, including public sector banks, commercial banks, international banks, NBFCs, and others.
  6. Enquiry Summary - It displays how many inquiries lenders have made recently.
  7. Derogatory information - It includes details on defaults, past-due and dishonored checks as a result of inadequate money, etc.
  8. Outstanding Balances by Credit Facility Groups details - This section provides a summary of the company's asset classification about the available credit facilities, including Non-Funded, Working Capital, Term Loan, and Foreign Exchange.
  9. Location details - It includes other addresses and contact details for the business, including location.
  10. Relationship details - It provides details on the related parties or businesses connected to the firm. Name, type, relationship, % ownership, address, contact information, PAN information, etc.
  11. Credit facility details – as a borrower - The credit facilities that the corporate entity has used are detailed in this section. Details on the credit facility, such as its type, credit status, payment status, non-sufficient fund information, and past-due information, are included.
  12. Credit facility details – as a guarantor - It includes information on the credit facilities that the business entity has backed.
  13. Suit filed details - It includes information about any lawsuits that any former lenders to the company entity have brought, if any.
  14. Credit rating summary - It includes the corporate entity's most recent three credit ratings as determined by an independent, accredited rating organization.
  15. Enquiry Details in the Last 24 Months - Inquiries performed by lenders into your company's credit application are detailed in this section. It offers details on credit providers, inquiry amounts, credit categories, and inquiry dates.

Importance of Business Credit Reports in India

Business credit reports are important in India for several reasons, including - 

  1. Assessing creditworthiness - Business credit reports provide an assessment of a company's creditworthiness by evaluating its credit history, payment patterns, outstanding debt, and other factors. This helps lenders and other creditors to assess the risk of extending credit to the company.
  2. Lowering lending costs - A good credit report can help a company secure a loan at more favorable interest rates and terms, while a poor credit report can result in higher costs of borrowing.
  3. Building trust - A positive credit report helps build trust between a company and its creditors, suppliers, and other business partners. It shows that the company is responsible and reliable in its financial dealings.
  4. Better financial planning - A business credit report can help a company identify areas where it needs to improve its creditworthiness, such as paying bills on time or reducing outstanding debts. This allows the company to plan its finances better and take steps to improve its credit score.
  5. Access to new opportunities - A good credit report can open up new business opportunities for a company, such as securing new contracts or expanding operations. This can help the company grow and increase its profitability.

Conclusion 

The importance of these credit reports in India cannot be overstated. Lenders and suppliers use these reports to assess the risk of doing business with a company. A good credit report can help a company secure loans at favorable rates and terms, while a bad credit report can make it difficult to obtain credit or result in higher interest rates. Additionally, a credit report can help a company identify areas where it needs to improve its creditworthiness, such as paying bills on time or reducing outstanding debts. Overall, a business credit report is an essential tool for any company looking to establish and maintain healthy financial relationships with its partners.

FAQ of Types of Business Credit Reports & Their Importance in India

1:What is a business credit report in India?

A business credit report is a report that contains information about a company's credit history and creditworthiness. It is generated by credit information companies like CIBIL, Experian, CRIF High Mark, and Equifax.

2:How can I obtain a business credit report in India?

You can obtain a business credit report in India by contacting a credit information company and providing them with the necessary information about your company. You will likely need to pay a fee to obtain the report.

3:How often should I check my business credit report in India?

It is a good idea to check your business credit report in India at least once a year to ensure that the information is accurate and up-to-date. You should also check your report before applying for credit or entering into any new financial agreements.

4:How can I improve my business credit score in India?

To improve your business credit score in India, you should make sure to pay your bills on time, reduce your outstanding debt, and avoid defaulting on any loans. You should also maintain a healthy credit utilization ratio by not using too much of your available credit. 

5:Are business credit reports important for small businesses in India?

Yes, business credit reports are important for small businesses in India. A good credit report can help a small business secure loans at favorable rates and terms, while a bad credit report can make it difficult to obtain credit or result in higher interest rates. Additionally, a credit report can help a small business identify areas where it needs to improve its creditworthiness, such as paying bills on time or reducing outstanding debts.