Mr. Sharma’s new grocery business was flourishing. Each one of his customers appreciated his staff’s way of handling their groceries and delivering them on time, as expected, for every single order.
To an onlooker, it was perfect… Motivated, diligent staff, best quality products, great reputation, increasing revenues… Trust and goodwill built over 4 years. His perfectionist workaholic attitude had paid off. To meet the increasing demands for his company’s services, Mr. Sharma had to inject all his savings and profits to hire new staff members and increase his inventories.
But Mr. Sharma always found some piece of the puzzle missing. In his eyes, the dream wasn’t complete. He wanted to expand his business exponentially, by harnessing newer way of doing things. But to compete with the bigger shops and e-commerce giants, he needed to inject more capital than his business could afford.
So, where could he go? Which bank would help him complete his picture; the vision he had for his company?
He talked to close friends and relatives. As expected, most recommended a loan. But even the word loan made Mr. Sharma shiver. He didn’t want to think back to those times…
For a major part of the initial capital that his business required as a budding start-up, Mr. Sharma had borrowed money from the bank in his locality, by pledging his home. Almost everyone in their closely-knit community knew about it. He had quit his job, even when his wife, children and parents were all dependent on him. It was the first time he had taken such a big risk, and it was also the first time he had borrowed a sum of money…
He didn’t bother to read all the fine print and the details while borrowing from the bank. He had thought to himself, “I will definitely be able to pay it back. This should be easy. I am sure I can earn this much till the time comes to repay the loan”. And in the frenzy of growing his business, he did not realise the importance of paying back the loan in time. He finally paid up after some reminders from the bank.
A couple of years later, he took another business loan and unsecured this time. Since his business financials were strong and his business references were strong, the bankers took another chance with him though there were some delays in repayments of last loan. This time too, he took his own sweet time to pay back the money. Little did he know that his reputation was being affected by these seemingly innocuous delays…
Now, in the current situation, where Mr. Sharma would probably approach a bank or financial institution again, he knew he would not get the fresh capital he needed easily. He knew that even though his business was going well, he wouldn’t be able to borrow the money.
But why was Mr. Sharma not able to borrow money this time?
He had checked his Credit Score and it was way below the acceptable limits due to the delays in his previous loan repayments.
Mr. Sharma then started researching about the various factors that contributed to his poor Credit Score. Here are a few important details that he came across:
Thus a good credit discipline of ensuring timely repayment of borrowed money is very important to ensure access to capital is available to you at times of need. Maintaining a good credit score for your business can go a long way… Not only does it allow your business to access the much-needed funding for its growth, but also allows you to fulfil the vision that you have for your business.
At KNAB Finance, we help you take care of your business financial health by keeping you informed about timely repayments. We remind you regularly to maintain credit discipline so that your credit score is maintained and you can easily access the capital you need to fulfil your dreams.
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