Five C’s: Helpful to Arrange Small Business Loans

If you are going to apply for a business loan then before entering in lender’s office make sure that you have done enough work on how to arrange the money. You must have proper idea on the amount needed, having a good business plan and what next upon loan rejection. Loan rejection can happen due to various factors. Here, 5 C’s are mentioning that will improve the chances of loan approval.

Character: Lenders access character of a person who comes with loan request to him. It includes several criterions like trustworthiness etc. It also includes business knowledge and experience, education as well personal and small business credit history. The first thing that a lender determine while approving a loan request is borrower’s ability to pay back the amount. It can be calculated easily after reviewing the cash flow of the business.

Collateral: Business loans are generally available against security called as collateral in financial terms. It reduces the risk of lending, means if borrower fail to pay back the amount from business profit the secured property will be used to collect the cash. Logbook loans are similar type of loans that can also be borrowed for business development.

Capacity: Any lender, banking institution or building societies get agree to offer cash only if borrower is capable to pay back the amount. It can be determining after reviewing credit score and past bank statements of the borrower.

Conditions: Conditions shows the review of credit or small business loan that are used for business expansion or equipment purchase. It similarly applies to external environment which can impact company’s ability for repayments such as customer base, liabilities, competitors and economics.

Capital: If you can afford partial expenses of your business from your personal savings or earlier profits from the business then it will convey a positive message to the lender. It will make them confident that lending for your business worth and you will be able to pay them back in time. It is better to show them that you are making percent down payments from your personal funds. You must have more than one option to arrange finance when it comes to business development. Be prepared for borrowings from banks or merchant lenders.

So, Character, Collateral, Capacity, Condition and Capital are five important C’s that can assist to arrange fund from banks through lending options. Make regular payments so that your credit score doesn’t get damage and you have open options to arrange cash in future.