When applying for a loan you need to be aware of a lot of significant aspects such as, the amount needed, how to create a good business plan and what to do when rejected. Sometimes factors like rejection can take place due to varied factors. However, if you follow these 5 C’s they will definitely help in the process of small business loan approval.
The 5 C’s of Small Business Loans Qualification
When you go for a loan the lender who is going to lend the cash for business to you assesses your character, the trustworthiness etc. The criteria for character consist of business experience and knowledge, personal and small business credit history and education.
When the bank or a private lender lends you money, they first determine the capacity of an individual or business to pay back. They easily do this by looking at the cash flow of the business and determine alternative courses of repayment available.
To ensure to the lenders that you will pay back, some kind of assurance is required. That assurance can be provided in the form of collateral. The collateral reduces the risk of lending, meaning if the business is not able to pay back the borrowed amount then it can be recovered through whatever has been kept as collateral. Collateral can consist of equipment, real estate, inventory, account receivables, and securities
If you are investing your own money in the company it gives a positive message to the lenders & makes them confident that this business is worth lending & it will be able to pay back well in time.
Always keep your options open and be prepared when it comes to borrowing money for business from bank or merchant lenders.