Your Next Business Loan

For your next Business Loan, consider the following below.

The 5 C's Of Business Credit.

Business Lenders often use this rubric to determine eligibility of business equity owners when applying for Business Lending.

Character: How do you present yourself as an applicant? Financial institutions will examine your relationships with them over time, along with reviews of your website and public reviews (if applicable) of your services. Bottom Line, they want to know as much information about the applicant they are examining.

Credit: Your personal credit and business credit will be evaluated. As I have previously reviewed, your personal and business credit scores are tied together. This matters mostly when start-up businesses are looking for capital through traditional business financing. If you have long established Business Credit, and your personal credit dips, you may see changes in future decisions for Business Credit applications.

Collateral: Does your business have any assets that can be used as collateral in the event of default? Financial institutions look for valuable equipment, or real estate to use as collateral when attempting to approve business equity owners. There are many consumers who believe the amount of funds they have liquid can be used as collateral. Very rarely is this the case with liquid funds in the modern day and age of Banking. However, keeping a consistent balance in your account will help your Character and Capital.

Capacity: Do you have the means to repay? Underwriters will review your financials, whether they are prior returns or future projections to examine whether or not the business/owner has the capacity to repay the debt. Collateral and liquid savings do not get examined when determining capacity to repay. If you have personal income sufficient to aid in repayment of the business loan, this may be considered as well.

Capital: Lenders like to see "skin in the game". They want to see that the business does have some funds to put forth for a down payment. In the case of many business term loans; which are used quite a bit for start-ups and acquisitions, the lenders will require a down payment. These are funds that cannot be gifted to a business - the business/owner must have proof that they have capital to put down and to sustain expenses in the event of low cash flow months.

If you'd like to know more about how to best be prepared as a business owner for your next business loan application, please reach out.

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