Micro, Small, and Medium Enterprises (MSMEs) are crucial drivers of India’s economy, contributing to employment, innovation, and the GDP. However, these businesses often face challenges when it comes to securing funding for growth.
CIBIL MSME Rank (CMR) plays a pivotal role in determining how easily a business can access financial support. Understanding and improving your CMR can open doors to better loan opportunities, lower interest rates, and higher loan amounts.
It is therefore important to understand how MSMEs can leverage the CIBIL MSME Rank to unlock the financial potential of their businesses.
What is a CIBIL MSME Rank (CMR)
The CIBIL MSME Rank is a crucial tool for assessing the creditworthiness of MSMEs. The rank is assigned on a scale of 1 to 10, with CMR-1 indicating minimal risk and CMR-10 suggesting the highest risk of default.
What Does CMR Measure?
- CMR reflects the business’s ability to repay loans based on its credit profile, repayment behaviour, and future repayment capacity
- CMR-1 businesses have a proven track record of timely repayments, while CMR-10 businesses may have struggled with payments or show signs of financial instability
Who Uses CMR?
- Banks and Non-Banking Financial Companies (NBFCs) use the CMR to evaluate loan applications from MSMEs, offering them terms based on the risk assessed
Why is CIBIL MSME Rank Important for MSMEs
For MSMEs, having a low CMR (closer to 1) can significantly affect access to finance in a number of ways:
● Better Loan Terms
MSMEs with a low CMR can secure loans at lower interest rates, reducing the overall cost of borrowing
● Higher Loan Amounts
Lenders are willing to offer larger loan amounts to businesses with low CMR, which can be used to fund expansion or new projects
● Faster Processing
Businesses with lower credit risk are often given quicker approvals for loans, enabling faster business growth
For example, an MSME with a CMR-2 is likely to get better loan terms than an MSME with CMR-7. This can make a significant difference in securing capital for expansion or upgrading operations.
How to Check Your CIBIL MSME Rank
Checking your company’s CIBIL score is a simple process, and it can be done in just a few steps:
- Visit CIBIL’s MSME page to access the credit report.
- Enter the company’s name, PAN number, and the contact information for the company and applicant.
- A registration fee of approximately ₹3000 is required to check the CMR.
- CIBIL will send a Registration ID via email. This ID is required to access your CIBIL MSME Rank.
- Complete the process by submitting the required KYC documents to verify the company’s details.
Checking your CIBIL MSME Rank periodically helps you stay informed about your credit standing and provides the chance to take corrective actions if necessary.
How to Improve Your CIBIL MSME Rank
Improving your CIBIL MSME Rank requires strategic financial management. Here are practical tips that can help you elevate your score:
● Timely Bill Payments
Just like individual credit scores, paying bills, credit lines, and loans on time is vital to maintaining a strong MSME credit history.
● Lower Credit Utilisation
Keep your credit utilisation ratio under 30% to show lenders that you can manage your finances without relying too much on credit.
● Clear Existing Debt
Prioritise clearing existing debt before taking on new loans. Over-leveraging can negatively impact your credit rank.
● Consider Short-Term Loans
Once existing debt is cleared, taking a short-term loan and repaying it on time will boost your CMR by proving your ability to manage credit effectively.
● Retain Older Credit Accounts
Keeping older credit lines open and maintaining a good payment history enhances your business’s credit profile.
Tip for MSMEs
Before taking on additional credit, ensure that your business maintains a low credit utilization ratio and clears any old debts. This will signal financial stability to lenders and increase your chances of getting better loan terms.
Conclusion
A low CIBIL MSME Rank can be the key to unlocking better loan terms, faster approvals, and more flexible repayment options for MSMEs. By improving your CMR through timely payments, reducing credit utilisation, and managing debt responsibly, your business can gain access to the capital it needs for growth.
Regularly checking your company’s CIBIL score and following these steps to improve your CMR will help your MSME stay competitive in a growing market, allowing you to secure financing with better terms and lower costs.
