Getting a business loan is common for start-ups, traders, retailers, and manufacturers looking to meet working capital requirements, purchase equipment, manage cash flow, or expand operations. While lenders evaluate multiple factors during the approval process, maintaining a healthy credit score can significantly improve your chances of qualifying for a business loan and securing favourable loan terms.
Credit scores generally range from 300 to 900, with higher scores reflecting stronger creditworthiness. Although scores above 700 are generally considered good, Bajaj Finance requires applicants to have a minimum credit score of 650 to be eligible for a business loan.
In summary
A business loan for low credit score may still be possible, but your credit profile plays an important role in your eligibility and the terms you receive. Understanding your credit score and taking steps to improve it can strengthen your chances of securing a business loan.
- Minimum credit score for business loan: A credit score of 685 or above is generally recommended to improve your chances of qualifying for competitive interest rates.
- Credit score range: Credit scores range from 300 to 900, with scores above 700 generally considered good by lenders.
- A lower score is not the end: A credit score below 685 does not automatically rule out financing. Improving your credit profile and exploring suitable loan options can enhance your eligibility.
- Ways to improve your credit score: Make repayments on time, keep your credit utilisation below 30%, and avoid submitting multiple loan applications within a short period.
- Plan your borrowing: Before applying, use the business loan EMI calculator to estimate your monthly repayments and choose a loan amount that fits your repayment capacity.
Once you have strengthened your credit profile, you can check your eligibility and apply online for a Bajaj Finance Business Loan.
Improving your credit score requires consistent financial habits rather than quick fixes. Small actions, such as paying bills on time, maintaining low credit utilisation, and reviewing your credit report regularly, can gradually strengthen your credit profile. If you are planning to apply for a business loan, these practices can improve your eligibility and help you secure financing with greater confidence.
How paying debts on time improves your credit score
Timely repayment of loan EMIs and credit card bills is the single most important factor influencing your credit score. According to most credit scoring models, your repayment history contributes around 35% of your overall credit score, making it the largest factor considered during credit assessment. Even one missed or delayed payment can remain on your credit report for several years and may affect future borrowing opportunities.
For example, if your EMI is due on the 5th of every month, paying it consistently before the due date demonstrates financial discipline and builds lender confidence. On the other hand, repeated late payments may lower your credit score and reduce your chances of qualifying for a business loan.
Setting up auto-debit instructions or payment reminders can help you avoid accidental delays. If you are applying for a business loan with a low credit score, maintaining a strong repayment history is one of the most effective ways to improve your eligibility over time.
Why checking your credit report regularly matters
Many borrowers assume their credit report is always accurate, but reporting errors can occasionally occur. Incorrect loan balances, duplicate accounts, closed loans marked as active, or wrongly reported missed payments can all negatively affect your credit score.
Reviewing your credit report at least once every few months helps you identify these issues early. If you notice an error, you can raise a dispute with the relevant credit bureau. Once the lender verifies the information, corrections are typically reflected within 30 to 45 days.
Regular credit report reviews also help you detect unauthorised loans or fraudulent credit activity before they become larger problems. Maintaining an accurate credit report can strengthen your credit profile and improve your chances of meeting the minimum credit score required for a business loan.
How a higher credit limit reduces your credit utilisation ratio
Credit utilisation refers to the percentage of your available credit that you are currently using. It accounts for approximately 30% of your credit score, making it the second most important factor after repayment history.
The credit utilisation ratio is calculated using the following formula:
Credit utilisation ratio = (Total credit used ÷ Total available credit) × 100
Financial experts generally recommend keeping this ratio below 30%.
For example:
- Credit limit: Rs. 2 lakh
- Outstanding credit card balance: Rs. 40,000
- Credit utilisation ratio: 20%
This is generally considered healthy because only a small portion of the available credit is being used. However, if the same borrower spends Rs. 1.4 lakh on the same card, the utilisation ratio increases to 70%, which may indicate higher credit dependence and could negatively affect the credit score.
Instead of increasing spending, requesting a higher credit limit while maintaining similar monthly expenses can help reduce your utilisation ratio and strengthen your overall credit profile.
Risks of becoming a guarantor or co-borrower on someone's loan
Many borrowers are unaware that becoming a guarantor or co-borrower can affect their own credit score. When you agree to guarantee someone else's loan, you become legally responsible for repayment if the primary borrower defaults.
For example, if you act as a guarantor for a friend and they repeatedly miss EMIs, those missed repayments may also appear in your credit history. This can lower your credit score and affect your own eligibility when applying for a business loan or any other form of credit.
Before accepting such responsibility, carefully assess the borrower's financial stability, repayment behaviour, and ability to repay the loan. Protecting your own credit profile today can make it easier to qualify for future borrowing when your business requires additional funding.
Why keeping older credit accounts open helps your credit score
The length of your credit history contributes around 15% of your overall credit score. A longer and well-managed credit history gives lenders greater confidence because it demonstrates responsible borrowing over an extended period.
For example, suppose you have a credit card that has been active for eight years with a strong repayment record and no payment defaults. Closing that account may reduce the average age of your credit history, which could have a small negative impact on your credit score. Keeping older accounts active, especially those with a positive repayment history, can strengthen your overall credit profile.
However, keeping an account open does not mean increasing your spending. Continue using older credit facilities responsibly, pay all dues on time, and avoid unnecessary borrowing. Maintaining a longer credit history alongside good repayment behaviour can improve your chances of qualifying for a business loan.
How a mix of credit types strengthens your credit score
Your credit mix accounts for approximately 10% of your credit score. Lenders generally prefer borrowers who have successfully managed different types of credit rather than relying on only one form of borrowing.
A balanced credit portfolio may include both secured and unsecured credit.
| Credit type | Examples | Why it helps |
|---|---|---|
| Secured credit | Home loan, loan against property, vehicle loan | Demonstrates your ability to manage long-term, asset-backed borrowing. |
| Unsecured credit | Credit card, personal loan, business loan | Shows responsible management of credit without collateral. |
| Balanced credit mix | Combination of secured and unsecured credit | Reflects diversified borrowing behaviour and responsible credit management. |
This does not mean you should take additional loans simply to improve your credit mix. Instead, focus on managing your existing credit responsibly. Over time, a healthy mix of credit products, combined with timely repayments, can strengthen your credit profile.
How multiple loan inquiries affect your credit score
Every time you apply for a loan or credit card, the lender performs a hard inquiry on your credit report. While a single inquiry usually has only a minor impact, multiple hard inquiries within a short period may reduce your credit score by around 5 to 10 points and signal higher credit dependence to lenders.
For example, if you apply for five business loans across different lenders within two weeks, each application creates a separate hard inquiry. Multiple recent inquiries may make lenders cautious because they could indicate urgent borrowing requirements or financial stress.
Before submitting an application, check the lender's eligibility criteria and estimate your repayment capacity. Wherever possible, compare loan options first and avoid making multiple formal applications. If you need to apply again after a rejection, allowing around six months before making another application may give you time to strengthen your credit profile and improve your eligibility.
How to assess your repayment capacity before applying for a business loan
Understanding your repayment capacity before applying for a business loan helps you borrow an amount that comfortably fits your business cash flow. Instead of choosing the maximum eligible amount, estimate a monthly EMI that your business can repay consistently without affecting day-to-day operations.
A business loan EMI calculator allows you to compare different loan amounts and repayment tenures before submitting your application. By adjusting these values, you can understand how your monthly repayment changes and select a repayment plan that aligns with your business income.
| Before applying | Why it matters |
|---|---|
| Estimate the required loan amount | Borrow only what your business genuinely needs. |
| Compare multiple repayment tenures | Understand how tenure affects your monthly EMI and total interest payable. |
| Review your monthly cash flow | Ensure the EMI remains affordable alongside existing business expenses. |
| Check existing repayment obligations | Avoid taking on more debt than your business can comfortably manage. |
| Use a business loan EMI calculator | Make an informed borrowing decision before applying. |
Taking a few minutes to estimate your EMI can help you borrow more confidently and reduce the risk of repayment stress. Before submitting your application, use the business loan EMI calculator to compare different repayment scenarios and choose a loan structure that suits your business needs.
