Should You Get a Business Loan with a Cosigner?

India’s dynamic business landscape often requires entrepreneurs to seek financial backing. If you’re considering a business loan, but uncertain about your eligibility due to credit score or limited business experience, involving a cosigner might be a viable option. In this post, we’ll explore the implications of getting a business loan with a cosigner.


What is a Cosigner?

A cosigner is an individual who agrees to repay a borrower’s debt in case the borrower defaults on the loan obligation. In essence, the cosigner acts as a backup, providing lenders an additional layer of security.

Why Might You Need a Cosigner for a Business Loan?

Startups or businesses with limited credit history, or those with a lower credit score, might find lenders hesitant to approve their loan applications. Here, a cosigner with a solid credit score can bolster the borrower’s credibility, potentially enhancing the chances of loan approval.

Pros of Getting a Business Loan with a Cosigner

  • Increased Chances of Approval: Lenders are more inclined to approve loans when they’re assured of repayment, making a credible cosigner valuable.
  • Lower Interest Rates: With reduced risk, lenders might offer more competitive interest rates.
  • Larger Loan Amount: Demonstrating higher repayment capability might help in securing a more substantial loan.
  • Better Credit History: Timely repayments can improve the credit history of both the borrower and the cosigner.

Cons of Getting a Business Loan with a Cosigner

  • Cosigner’s Responsibility: If the borrower defaults, the cosigner becomes legally bound to repay the loan.
  • Impact on Cosigner’s Credit Score: Delays or defaults by the borrower can adversely affect the cosigner’s credit score.
  • Potential Loss of Cosigner’s Assets: In extreme cases of loan defaults, the cosigner’s assets could be at risk.

How to Choose a Cosigner for a Business Loan

Finding the right cosigner can be crucial. Here’s a guide:

  1. Good Credit Score and Steady Income: Choose someone financially stable with a commendable credit history.
  2. Willingness and Capability: Ensure the cosigner is prepared for the responsibility and can cover repayments if needed.
  3. Permission: Always get explicit consent from the cosigner before involving them in your loan application.


While having a cosigner can certainly boost your chances of securing a business loan, it’s essential to understand the responsibilities and potential pitfalls. The decision should be mutual, with clear communication between both parties. If approached wisely, this arrangement can be beneficial for both the business and the cosigner.

Key Takeaways

  • Cosigners can enhance the likelihood of loan approval for businesses with limited credit history or lower scores.
  • While there are benefits, there are also significant responsibilities and potential risks for the co-signer.
  • Selecting the right cosigner involves careful consideration and mutual understanding.


1. Can a cosigner be a non-relative?
Yes, a cosigner can be anyone, relative or not, as long as they meet the lender’s criteria and are willing to take on the responsibility.

2. What happens if the primary borrower defaults?
If the borrower defaults, the cosigner becomes legally responsible for repaying the loan. This can also impact the cosigner’s credit score.

3. Can a cosigner help in getting a larger loan amount?
Yes, having a cosigner might lead to securing a more significant loan if the lender feels more confident about repayment.

Begin Your Loan Journey with Ruloans Today!

If you’re considering a business loan and evaluating the prospect of involving a cosigner, let us guide you. At Ruloans, we are committed to providing the best financial solutions for your needs. Click here to start your loan journey.

Pin It on Pinterest