Oct 21
Applying for a loan is easier than you think
October 21, 2016
Have you decided to take the step of looking for financing for your small or medium-size business? Here are some strategies for applying for commercial credit.
Finding financing for a small business is easier than you think. If you prepare and get organized to show that you know what’s needed and have the ability to meet the payments, you will be likely to succeed in getting it.
Demonstrate the 5 C’s of Commercial Credit
We’re not talking about academic grades. From the banker’s point of view, there is a formula known as the 5 C’s for obtaining a business loan. They are: capacity to pay, character, capital, collateral and conditions. The 5 C’s refer to attributes the financial institutions take into account when considering your application for credit. Learning them and complying with all of them will make your road a smoother one.
- Capacity to pay – This is the most important aspect. You must clearly show how you will repay the loan you are requesting. In that sense, your payment history as an individual is an excellent indicator.
- Character – Showing that you are reliable is essential, bring to the table your credentials, your preparation and your experience in the field. Also include information about your working team.
- Capital – Show your commitment and determination by assuming financial risk (investing your own money in the business). This is a good sign for the bank.
- Collateral or other guarantee – Show that you have a “plan B” for making the loan payments in case the business’ cash flow is not sufficient.
- Economic Conditions – No missteps. Understand that the banking officer will also analyze the economic environment and the conditions in the industry that could affect the business you propose to open.