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Are you planning to start your own franchise business but worried about getting a loan?
Don’t worry — you’re not alone. Many aspiring entrepreneurs want to open a franchise but face challenges when it comes to loan approval. One of the key things banks and NBFCs look at is your credit score.

In this guide, you’ll learn everything you need to know about credit score requirements for a franchise business loan — including what a credit score is, the ideal range, how it affects loan approval, and how to improve it before applying.

What is a Credit Score?

A credit score is a 3-digit number (usually between 300 and 900) that represents your creditworthiness — basically, how reliable you are at paying back loans.

In India, your credit score is calculated by agencies like CIBIL, Experian, Equifax, and CRIF High Mark.

• A high credit score means you’ve managed loans responsibly and are more likely to get approved easily.
• A low credit score means you may have missed payments or have high outstanding debts.

Why Credit Score Matters for a Franchise Business Loan

When you apply for a franchise business loan, banks and lenders want to make sure you’re financially responsible. Your credit score tells them that.

Here’s why it’s important:

• It shows your ability to repay the loan on time.
• It determines your loan eligibility and interest rate.
• A good score helps you get faster approval and higher loan amounts.

If your credit score is low, lenders may either reject your application or offer loans at a higher interest rate.

Ideal Credit Score for Franchise Business Loan

So, what’s the magic number?
Here’s a quick breakdown:

Credit Score Range	Meaning	Loan Approval Chance
750 – 900	Excellent	Very High
700 – 749	Good	High
650 – 699	Fair	Moderate
550 – 649	Poor	Low
Below 550	Very Poor	Very Low / Rejected

Most banks and NBFCs prefer applicants with a credit score of 700 or above for franchise business loans.

However, if your credit score is between 650–699, some lenders may still approve your loan — especially if you have strong business financials or a co-applicant with a good score.

Minimum Credit Score Required by Different Lenders

While requirements vary from lender to lender, here’s a general guideline for franchise business loans in India:

• Public Sector Banks (like SBI, Bank of Baroda) → Minimum 700
• Private Banks (like HDFC, ICICI, Axis) → Minimum 725
• NBFCs & Fintech Lenders → Minimum 650
• Government Schemes (like PMEGP or Mudra) → May consider lower scores if eligibility criteria are met

So even if your score isn’t perfect, government-backed loan schemes can be a good starting point.

Other Factors Besides Credit Score

While credit score is crucial, it’s not the only factor lenders consider for franchise business loans. They also look at:

1. Business Plan & Franchise Agreement
   • A clear plan showing revenue potential and expenses can improve your chances.
2. Collateral or Security
   • Offering assets or property as collateral builds lender confidence.
3. Income Stability
   • Regular income or strong business cash flow helps lenders trust your repayment ability.
4. Experience & Franchise Brand
   • Well-known franchise brands (like Subway, Apollo Pharmacy, or Kidzee) often have easier loan approvals.
5. Debt-to-Income Ratio
   • The lower your total existing loan obligations, the better your approval chances.

How to Improve Your Credit Score Before Applying

If your credit score isn’t where it needs to be, don’t worry — you can improve it with a few smart steps:

1. Pay All EMIs and Credit Card Bills on Time
   • Even a single missed payment can lower your score.
2. Reduce Outstanding Debts
   • Pay off existing loans to lower your debt-to-income ratio.
3. Avoid Applying for Multiple Loans Simultaneously
   • Too many loan applications can make you look credit-hungry.
4. Monitor Your Credit Report Regularly
   • Check for errors in your report and get them corrected.
5. Use Credit Responsibly
   • Keep credit card utilization below 30% of your total limit.

Improving your score even by 50–100 points can make a huge difference in getting your franchise business loan approved at better interest rates.

Low Credit Score? You Still Have Options

If your credit score is below 650, you still have a few ways to get funding:

• Apply with a Co-Applicant – If your partner or spouse has a better credit score, apply jointly.
• Offer Collateral – Secure your loan with property or business assets.
• Choose NBFCs or Fintech Lenders – They’re more flexible than traditional banks.
• Government Loan Schemes – Look into PMEGP, CGTMSE, or Mudra Loans.

These schemes often focus more on your business plan than your credit history.

How Franchise Bhoomi Helps You Get a Franchise Business Loan

At Franchise Bhoomi, we make your loan process simple and stress-free.

Here’s how we help:

1. Loan Guidance: We help you choose the right lender based on your credit score and franchise type.
2. Document Support: We assist in preparing all necessary loan documents — business plan, franchise agreement, financials, etc.
3. Fast Approvals: Our partners work with top NBFCs and banks to speed up the process.
4. Personalized Consultation: Whether you’re starting a food, retail, or education franchise, we help you find the best financing option.

So even if your credit score isn’t perfect, Franchise Bhoomi helps you improve your chances and connect with the right lenders.

Conclusion

Your credit score plays a major role in getting a franchise business loan.
A score of 700 or above is generally considered safe, but even if yours is lower, you still have options through NBFCs and government-backed schemes.

Take steps to improve your credit score, maintain clean repayment history, and prepare strong documents — that’s the key to getting your franchise business loan approved quickly.

And remember, Franchise Bhoomi is here to help you every step of the way — from finding the right franchise to securing your business loan.

FAQs on franchise business loan