5 C’s for a Business Loan

There are a few steps involved in being accepted to receive a business loan. The first step in the process of receiving a business loan usually involves completing an application package which may even involve a lot of paperwork. The next step in the process may involve the paperwork being evaluated by the loan committee of the lending institution. 

Loan Evaluation Process:
Approval for a business loan can be instant or can take a few weeks. The borrower will pull your credit or may use your credit score in order to analyze you application. Sometimes lenders may ask you to prove or clarify something which may be a sign that you are being considered. Below are few certain that banking industry professionals deem essential called the “5 “Cs” when evaluating a loan:

1. Character- Having a good character that will constitutes your reputation, personal history, and past involvement with the lender will indicate how well you repay your loan.

2. Capacity-Be sure that the information that includes your net worth, liability/asset structure, liquidity, cash flow, is put into your application package.

3. Collateral-Few times new businesses do not have long history of borrowing which may mean they may have assets to pledge as collateral and in some cases they may pledge personal assets in order to get loans. Make sure your collateral meets the loan institutes acceptable standards.

4. Capital-Having a good capital structure will give you points with the lending institute because this will show you can cover your loan.

5. Conditions-You should be aware all aspects that pertain to your loan such as the economy, related industries, etc.

To enhance the chances of your application to get approved by the loan committee use the following tips:

There is no 100% guaranteed formula to ensure your loan will definitely be approved but there are ways to encourage a good review of your Business Loan such as making the lenders fully aware off your business plans, detailing to the lending company what the funds are to be used for, and providing financial information that is both current and high-quality.

A great way to show the borrower company that you do not involve a risk of not paying back your loan is to detail how the funds are to be used and how you intend to repay the loan by:

• Detail how you intend to use the funds by specific examples.
• You should be able to mention sources of cash repayment from past documented performance reports
• Supply 2-3 alternate forms of repayment sources not involving the liquidation of your pledged collateral
• In terms of liquidity and value, give an overview of your collateral that relates to the terms of the loan.
• Mention different risk factors to include a worst case scenario.
• Supply the guarantors’ educational background including risk analysis which shows that the guarantor is capable and a willing repayment source.
• Be ready to provide credible and concise answers to the reviewing committee.

The best way to build a great relationship with a number of reputable commercial institutes to enhance your chances of loan approval is to build partnerships with these institutions that will benefit both you and the lending institutions.

 

Learn more about Small Business Loans at RapidAdvance.com

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