What is CIBIL MSME Rank and its key parameters

Dive into the intricacies of CIBIL MSME Rank and discover what a good rank means for your business.
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2 min read
7 Oct 2023

The CIBIL MSME Rank (CMR) is a game-changer for Micro, Small, and Medium Enterprises (MSMEs). It helps lending institutions make informed decisions when providing credit to MSMEs based on their risk profiles.

CIBIL MSME Rank for acquisition

The CIBIL MSME Rank is a powerful tool for assessing credit risk. Designed to predict the probability of default for MSMEs over a one-year horizon, CMR assigns a grade on a scale of 1 to 10. CMR-1 represents the least risky MSME, while CMR-10 indicates the highest risk.

Let’s take a closer look at what makes the CMR such a crucial factor in the financial landscape by looking at how the CIBIL MSME Rank is calculated.

How is the CIBIL MSME Rank calculated

The calculation of CMR involves a meticulous evaluation of several key parameters:

  1. Credit history: This parameter scrutinises the past record of an individual or a company concerning their ability to repay debts. A strong credit history translates into a lower risk assessment.

  2. Payment behaviour: Your pattern of making payments, whether timely or delayed, is under the microscope here. Consistent and timely payments bode well for a favourable CMR.

  3. Credit utilisation ratio: It is all about balance. This parameter assesses the amount of credit you are using compared to your total available credit limit. A lower ratio can positively impact your CMR.

  4. Outstanding debt: The total amount of debt you owe is an essential factor. High outstanding debt may lead to a higher risk perception.

  5. Industry type and business size: The sector in which your business operates and its scale have an influence. Some industries inherently carry higher risk, and this is factored into the CMR.

  6. Liquidity: Liquidity is assessed by examining the patterns of funds utilisation over the past 24 months. Consistent, well-managed liquidity can boost your CMR.

  7. Firmographics: Descriptive attributes, such as your business's maturity, ownership type, industry, and location, provide context for your CMR.

Importance of CIBIL MSME ranking

So, why does your CMR matter so much? Well, because a good CIBIL MSME Rank opens doors. A strong CMR can make it easier for businesses to secure loans at favourable interest rates. It can also give you the upper hand when negotiating terms with lenders.

So, your CIBIL MSME Rank is not just a number; it is a reflection of your creditworthiness. Maintaining a good CMR is vital for businesses seeking loans. By offering a comprehensive assessment of your creditworthiness, it empowers lenders to make informed decisions and allows you to secure loans at favourable interest rates.

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Frequently asked questions

What is a good CIBIL Rank?

A CMR between CMR-1 and CMR-3 is considered good. These ranks reflect a low risk of default, making your business an attractive prospect for lenders.

What is the minimum CIBIL Score required for a business loan?

The minimum CIBIL Score for a business loan can vary from lender to lender. However, most lenders prefer a minimum CIBIL Score of 750. A higher CIBIL Score indicates a lower risk of default, making it easier to secure loans.

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