MSME Week: Looking for loans to revive your business? 6 things you must keep in mind

From improving credit behaviour to timely repayments and having a good relationship with your lender- here’s a look at key functions to help you build a good CIBIL Rank, according to Sujata Ahlawat of TransUnion CIBIL

2nd Jul 2020
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Timely payments, an efficient management of cash flows, making the most of government support schemes and taking on moderate/required credit are some of the ways in which micro, small and medium enterprises (MSMEs) in India can maintain their liquidity and prepare themselves for cheaper and faster loans to take the growth story forward, Sujata Ahlawat, Head - Direct to Consumer Business at TransUnion CIBIL, said during a webinar organised by SMBStory for MSME Week, powered by CIBIL, India's first credit information company and associate sponsor, Dell Technologies.


The discussion comes at a time when the government’s Unlock 1.0 initiative is in full throttle and efforts are underway to help MSMEs recover from a deep, coronavirus-induced slowdown. Among the notable measures, as part of the government’s Rs 20 lakh crore relief package, were the announcement of Rs three lakh crore collateral-free loans, Rs 20,000 crore of subordinate debt and changing the definition of MSMEs.


Sujata focused on a host of topics related to SME loans and the role of TransUnion CIBIL in ensuring access to cheaper and faster credit to SMEs to help with re-establishing growth momentum.


“We follow a two-pronged approach — educate and facilitate. We reach out to SMEs and their partners, educating them about having the appropriate credit behaviour and its long-term implications. On the other side, we work with banks to identify creditworthy entities so that they (SMEs) get access to cheaper credit,” Sujata said.



Here’s a look at a few key takeaways from the discussion that could help SMEs build a healthy credit profile.

Improve credit behaviour

Entities need to be disciplined in their repayments as well as loan-taking patterns. SMEs can aim to have a CIBIL Rank below six and then work towards raising it to between one and four.


“This rank will reflect a healthy profile and will help in getting access to formal credit, at a cheaper rate,” Sujata said.

Understanding credit profile

While the government has introduced measures for the sector, companies need to understand their own credit profile and then opt for the right choices, she said.


“The multiple measures, though MSME-focused, are skewed towards the fundamentally sound and stable entities in the space who will be able to repay the debt in the future. So, it is important for companies to understand and monitor this credit profile before opting for credit.”

Cash Flow management

An efficient management of the cash flow situation will help a company in the long run. Sujata highlighted the importance of having a cautious approach in spending money and saving funds to be able to build on a healthy credit behaviour.


“While making the business plan, companies need to save for a rainy day. Make the best use of all government schemes, reach out to your lenders to understand how to save for your future. One must always be loan-ready and credit conscious.”


Moratorium utilisation

With the government offering a moratorium on loans for businesses and individuals alike, Sujata said companies must understand their own financial situation before opting for it. She explained that this was not a waiver of their loan, but a deferral on offer.


“So, companies need to determine if they need to opt for the moratorium. But it is equally important to start repayments once the period is over in order to maintain a healthy CIBIL Rank or a credit report.”

Timely repayments

After availing any form of credit or opting for any of the government schemes, it is important to maintain a timely repayment habit and a schedule of the same. Along with avoiding a debt trap, this will help companies have good repayment behaviour and nudge banks to lend to smaller and medium enterprises as well, she said.


“Keep checking on overdues, delinquencies and reach out to your lender in case of any discrepancies. You can also reach out to TransUnion CIBIL in case of a dispute regarding the rank,” she said.

Credit relationships

In the journey towards establishing a good credit profile, it is of utmost importance to have a good relationship with your lender and make them a partner in your credit improvement journey.

“Approach your lender and understand the credit options you have. A good understanding and a healthy CIBIL Rank will help you avail better loans and underwritings become easier and cheaper,” said Sujata.

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