How Credit Rating, MSME Registration Help?

There are a number of credit rating agencies in India, and being rated by one or more of them can help business to grow. Some of the popular credit rating agencies are CRISIL, SMERA, and ONICRA.

Says Prarthana Gupta, CEO, Cache Technologies, which has a B+ credit rating, “The rating helped us to negotiate better with our bankers for an overdraft and other business loans, and also helped us to get better credit from our foreign suppliers.”

Typically, a rating helps partners to get better interest rates – which could be 0.5-1.5 percent lower than the prevailing interest rates – from financial institutions. The annual cost of getting a credit rating varies from less than Rs 50,000 to Rs 110,000 based on the size of the company. Most credit rating agencies also offer discounts on their fees, and partners can always negotiate it.

“Many customers give importance to CRISIL rating,” asserts Neel Shah, Director, Insight Business Machines. “That’s because a CRISIL rating proves that the partner and its promoters have engaged transparently to open its books and documents which an organization with short-term vision will not.”

Another useful move is to get registered with the Ministry of Small & Medium Enterprises (MSME). Informs Sudhir Arora, Director, Computer Gallery, Indore, “It typically costs between Rs 3000 and Rs 5000 if you ask your CA or an agent to get you registered. If you are doing it all by yourself, you pay less than Rs 500.”

The benefits of MSME registration are several. “If you are addressing the government sector, in many cases your Earnest Money Deposit amount is waived. The cost of tender documents, which in most cases is above Rs 5000, is also waived,” says Shah of Insight.

Apart from these benefits, the Small Industry Development Bank of India (SIDBI) offers very attractive unsecured loans for companies engaged in manufacturing or services at interest rates as low as 11.5 to 15 percent.