HOW CREDIT RATING HELPS
There are a number of credit rating agencies in India, and being rated by one or more of them can help a business to grow. Some of the popular credit rating agencies are CRISIL, SMERA and ONICRA.
Says Amit Rambhia, CEO, Vardhaman Technology, Mumbai, which has a CRISIL 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 ` 50,000 to ` 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 a CRISIL rating,” asserts Neel Shah, Director, Insight Business Machines, Mumbai. “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 Kshitij Kotak, CEO, Fortune Greycells, Mumbai, “It typically costs between ` 3,000 and ` 5,000 if you ask your CA or an agent to get you registered. If you are doing it all by yourself you pay less than ` 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 ` 5,000, is also waived,” says Shah.
Apart from these benefits, the Small Industry Development Bank of India (SIDBI) offers very attractive unsecured loans for companies engaging in manufacturing or services at interest rates as low as 12.5 to 15 percent.
Many customers give importance to CRISIL rating, because it proves that the partner has engaged transparently to open its books which an organization with short term vision will not