Business Loan with Low CIBIL Score – Top Tips & Options

Need secure funding for your business but have a low CIBIL score? Well, you’re not alone. So many entrepreneurs face rejection from traditional lenders because of poor credit. But that doesn’t mean funding is out of reach.

Alternative financing options cater specifically to businesses with low credit scores. Like, secured loans, NBFCs, and fintech lenders. These solutions often come with flexible terms, higher interest rates, or collateral requirements. In that, the interest rate on a business loan, in case of lower credit score, will be higher. But still, funding is possible.

So, this blog will help you understand how to get a business loan with a low CIBIL score and rebuild credit over time. But what is the minimum credit if you want a business loan?

Significance of CIBIL Score

Your CIBIL score is a three-digit number (ranging from 300 to 900) that lenders use to assess your creditworthiness. A high score (750+) signals reliability, helping you secure loans faster, at lower interest rates, and with better terms. A low score (below 650) can lead to rejections, higher interest rates, or stricter repayment conditions.

Beyond loan approvals, your CIBIL score impacts:

• Loan Amount & Interest Rates: Better scores mean larger loans at competitive rates.
• Negotiation Power: Strong credit history lets you bargain for flexible repayment options.
• Business Growth: Consistent, timely repayments improve credibility for future funding needs.

If your score is low, focus on correcting errors in your credit report and reducing debt. And, making timely payments to rebuild it over time. A strong CIBIL score isn’t just about getting a loan—it’s about securing your business’s financial future.

Minimum CIBIL Score for a Business Loan

Most traditional banks and NBFCs prefer a CIBIL score of 700 or above for business loan approvals. However, some lenders may accept scores as low as 600–650. That is especially if you provide collateral, strong business revenue, or a solid repayment plan.

Startups or businesses with poor credit may need to explore alternative lenders, secured loans, or fintech-based financing options.

However, a higher score (750+) ensures better interest rates and terms. While it’s still possible to get a business loan with a lower credit score, improving it before applying can increase approval chances. Or opt for lenders specializing in low-credit borrowers.

How to Get a Business Loan with a Low CIBIL Score?

A low CIBIL score (below 650) can make securing a business loan challenging—but not impossible. While traditional banks may reject your application, there are alternative lenders and other approaches to secure funding. Here’s how:

Explore Alternative Lenders

When traditional banks reject your loan application due to a low credit score, alternative lenders can be a lifeline. These institutions often have more flexible eligibility criteria and faster approval processes. And they might be willing to look beyond just your CIBIL score. Here are a few options.

• NBFCs & Fintech Companies: More flexible than banks, NBFCs like Nihal Fintech often consider business revenue over credit scores.
• Microfinance Institutions (MFIs): Offer smaller loans with relaxed eligibility criteria.
• Peer-to-Peer (P2P) Lending: Connects borrowers directly with investors willing to take moderate risks.

Opt for Secured Loans

If your credit score is weak, offering collateral (like property, equipment, or inventory) can improve your chances of approval. Secured loans reduce the lender’s risk, making them more willing to extend credit despite a low CIBIL score. Just ensure you can repay—defaulting could mean losing your pledged assets.

Show Strong Business Financials

Lenders look beyond credit scores when assessing risk. Presenting solid financials can offset a low CIBIL score. That means steady revenue, healthy profit margins, and consistent cash flow. Make sure to create the best project report for the loan. In that, provide bank statements, GST returns, and growth projections to prove your repayment capacity.

Apply with a Co-Applicant or Guarantor

A co-applicant or guarantor with a strong credit profile can bolster your loan application. Their financial credibility reassures lenders, increasing approval odds and possibly securing better terms. Ensure they understand the responsibility—defaults will impact their credit too.

Start Small & Rebuild Credit

Instead of a large loan, consider a smaller credit line or short-term financing. Timely repayments on these can gradually improve your CIBIL score, opening doors to bigger loans later. Microfinance institutions and small-ticket business loans are good starting points.

Correct Errors in Your Credit Report

Mistakes in your CIBIL report—like incorrect late payments or outdated accounts—can drag down your score. Regularly check your credit report and dispute inaccuracies with the bureau. A corrected report could instantly boost your score, improving loan eligibility.

While interest rates may be higher initially, timely repayments can help you refinance later at better terms. But still, don’t think the lower CIBIL scores will be good forever, because they won’t be. You need to rebuild your credit.

How to Improve Your CIBIL Score?

A strong CIBIL score (750+) means better loan terms, lower interest rates, and faster approvals. If your score is low, follow these proven strategies to rebuild it systematically.

• Pay EMIs & Bills on Time: Set reminders or auto-payments—delays hurt your score the most. Even one missed payment can drop it significantly.
• Reduce Credit Utilization: Keep credit card balances below 30% of your limit. High usage signals financial stress to lenders.
• Avoid Multiple Loan Applications: Each hard inquiry lowers your score. Space out applications by 6+ months and compare lenders beforehand.
• Maintain a Healthy Credit Mix: A balance of secured (loans) and unsecured (credit cards) credit shows responsible borrowing behavior.
• Clear Old Debts & Settlements: Close overdue accounts and negotiate settlements—unresolved dues keep dragging your score down.
• Check & Fix Credit Report Errors: Dispute inaccuracies (wrong late payments, duplicate accounts) with CIBIL—it can boost your score fast.
• Keep Old Accounts Active: A longer credit history improves credibility. Avoid closing old credit cards even if unused.
• Limit New Credit Requests: Too many new loans/cards in a short span make you appear credit-hungry—lenders see it as risky.

There’s no quick fix—focus on long-term financial habits. A higher CIBIL score means lower borrowing costs, better approvals, and stronger negotiating power. And with a higher credit, you can get the best unsecured business loans.

Best Interest Rates on Business Loans

Business loan interest rates typically range from 10% to 30% p.a., depending on lender type, borrower profile, and loan terms. Here are the top options:

Business loan interest rates are set by lenders (banks/NBFCs) based on their assessment of your profile. While rates are important, don’t forget to compare repayment flexibility, loan tenure options, max loan amount, and additional fees.

FAQs on Business Loans for Lower CIBIL Score

Let’s Conclude

A low CIBIL score doesn’t have to be the end of your business funding journey. Traditional banks may hesitate, but alternative lenders, secured loans, and government-backed schemes will be suitable. The key is to focus on your business’s strengths to offset credit weaknesses.

Use this as an opportunity to rebuild your credit by borrowing responsibly, repaying on time, and correcting report errors. Over time, improving your CIBIL score will open doors to better loan terms and lower interest rates.

So, want the best funding for your business? Then explore our financing options today!