Understanding CIBIL MSME Rank (CMR) In CIBIL Report

CIBIL MSME Rank (CMR) helps lenders assess the creditworthiness of Micro, Small, and Medium Enterprises (MSMEs). It is a rank given to businesses based on their credit history and repayment behaviour. A good CMR can improve the chances of getting a loan, while a poor rank could make borrowing difficult.

What is CIBIL MSME Rank (CMR)?

CMR is a rank assigned to MSMEs based on their credit history. It ranges from CMR-1 to CMR-10, where:

• CMR-1 shows the lowest credit risk
• CMR-10 indicates the highest credit risk

Lenders use this rank to decide whether to approve a loan and what interest rate to offer. A business with a lower CMR may get loans easily, while a higher CMR may lead to loan rejection or higher interest rates.

How is CMR Calculated

TransUnion CIBIL calculates the CIBIL MSME Rank (CMR) based on multiple financial factors that help lenders assess a business’s creditworthiness:

• Repayment history determines whether the MSME has consistently paid past loans and credit dues on time
• Outstanding debt refers to the total unpaid loan amount, which affects the business’s financial stability and credit risk
• Credit utilisation measures how much of the approved credit limit the business is currently using, indicating borrowing dependency
• Age of credit history considers how long the MSME has been using credit, with a longer history generally seen as more reliable
• Credit mix evaluates the balance between secured and unsecured loans, where a diverse mix may indicate better financial management
• Past loan defaults include any missed payments, loan write-offs, or settlements that could negatively impact the CMR

Lenders review these factors to determine loan eligibility, interest rates, and borrowing limits for businesses.

CIBIL MSME Rank vs. CIBIL Score

CIBIL MSME Rank (CMR) assesses business creditworthiness, while the CIBIL Score applies to individuals. Lenders use both to evaluate loan eligibility, interest rates, and credit risk. Here's a comparison:

How CIBIL MSME Rank Affects the CIBIL Report

A CIBIL report contains a company’s credit history, including:

• Past loans and repayment details
• Current credit obligations
• CMR assigned based on financial behaviour

If a business has missed loan payments or has high outstanding debt, it may get a higher CMR (CMR-7 to CMR-10), which indicates a higher risk for lenders. On the other hand, a business with a strong repayment record may get CMR-1 to CMR-3, making it easier to secure loans.

How to Improve CIBIL MSME Rank

Maintaining a favourable CIBIL MSME Rank (CMR) helps businesses secure loans at better terms and improve financial credibility with lenders and stakeholders:

• Pay all loan EMIs and credit card bills on time to maintain a strong repayment history and avoid negative marks on the CIBIL report
• Reduce outstanding debt by clearing dues regularly, as a lower debt burden indicates better financial health and improves the CMR
• Monitor the CIBIL report frequently to check for errors, incorrect transactions, or outdated information that may negatively impact the CMR
• Avoid multiple loan applications within a short period, as excessive credit inquiries may signal financial stress and lower the CMR
• Maintain a balanced credit mix by using both secured and unsecured loans instead of relying only on unsecured borrowing
• Limit credit utilisation by keeping credit usage below 30% of the total available limit to demonstrate responsible financial management
• Avoid loan defaults or settlements, as they significantly impact creditworthiness and may result in a higher CMR

Why CMR is Important for MSMEs

CIBIL MSME Rank (CMR) helps businesses secure credit by indicating their creditworthiness to lenders, impacting loan approval, interest rates, and overall financial opportunities:

Loan Approval Chances

A lower CMR (CMR-1 to CMR-3) improves the chances of getting business loans, while a higher rank may lead to loan rejection or stricter terms.

Interest Rate Determination

Businesses with a favourable CMR could receive loans at lower interest rates, whereas those with a higher CMR may face higher borrowing costs.

Access to Higher Credit Limits

Lenders may offer higher loan amounts to businesses with a strong CMR, as it indicates lower credit risk and financial stability.

Business Expansion Opportunities

A good CMR helps MSMEs secure funding for expansion, purchase of machinery, or working capital needs without difficulty.

Supplier and Investor Confidence

A favourable CMR enhances a company’s credibility, making it easier to build trust with suppliers, investors, and other stakeholders.

Faster Loan Processing

Lenders may process loan applications quicker for businesses with a good CMR since they are considered lower-risk borrowers.

Better Negotiation Power

Businesses with a strong CMR may negotiate better loan terms, including flexible repayment options and reduced collateral requirements.

How to Check CIBIL MSME Rank

Businesses can check their CIBIL MSME Rank through the official TransUnion CIBIL website by following these steps:

• Go to the CIBIL Commercial Report section on the official website: https://www.cibil.com
• Select the option to request a CIBIL Rank and Company Credit Report (CCR), which includes the CMR
• Enter the Company Name, PAN, Registered Address, and other required details to verify the business identity
• Choose a pricing plan since CIBIL Commercial Reports are paid and require a subscription
• Complete the online payment to generate the report, with prices varying based on the selected plan
• Download the CIBIL Commercial Report once processed to check the assigned CIBIL MSME Rank (CMR) and credit history details

Common Mistakes That Affect CMR

Avoiding these mistakes could help businesses maintain a favourable CIBIL MSME Rank and improve their chances of securing loans at better terms:

Delayed Payments

Late repayments on loans or credit cards may lower CMR, signalling higher credit risk to lenders.

High Credit Utilisation

Using a large portion of the available credit limit could indicate financial strain, negatively affecting the CMR.

Ignoring the CIBIL Report

Not checking the CIBIL report regularly may result in unnoticed errors that impact the MSME’s creditworthiness.

Frequent Loan Applications

Applying for multiple loans within a short period could lower CMR, as it suggests high dependency on credit.

Defaulting on Loans

Loan defaults or settlements may significantly increase credit risk and result in a higher CMR.

Lack of Credit History

Having little or no credit history might make it difficult to get a favourable CMR, as lenders have no past data to assess risk.

Unbalanced Credit Mix

Relying only on unsecured loans instead of maintaining a mix of secured and unsecured credit may negatively impact CMR.

Conclusion

CIBIL MSME Rank plays a crucial role in determining a business’s creditworthiness. A lower rank (CMR-1 to CMR-3) improves loan approval chances, while a higher rank (CMR-7 to CMR-10) makes borrowing difficult. Businesses can maintain a favourable rank by repaying loans on time, reducing debt, and monitoring their CIBIL report regularly.

Understanding CMR helps MSMEs make informed financial decisions and improve their access to credit.