Below are the 5 C's of credit that lenders use when they consider a loan.
Capacity to repay is the most important of the five C's. The lender will want to know exactly how you intend to repay the loan, while considering your past credit history and cash flow.
Capital is the money that you will personally invest in the business. Lenders usually want at least a 10%-20% investment from you. This indicates to them that you are willing to risk some of your own money.
Collateral or guarantees are forms of security you can provide the lender in case the loan is defaulted on. This means that the remaining 90%-80% of the loan will need to have something to collateralize or guarantee it for you. This is usually real estate or a fixed asset.
Conditions is what the money will be used for. Will the money be used for working capital, additional equipment, or inventory? The lender also will consider the local economic climate and conditions both within your industry and in other industries that could affect your business.
Character is the general impression you make on the lender. This is made up of your experience in running a business, in this industry and the "gut" feeling they have about you.
Capacity to repay is the most important of the five C's. The lender will want to know exactly how you intend to repay the loan, while considering your past credit history and cash flow.
Capital is the money that you will personally invest in the business. Lenders usually want at least a 10%-20% investment from you. This indicates to them that you are willing to risk some of your own money.
Collateral or guarantees are forms of security you can provide the lender in case the loan is defaulted on. This means that the remaining 90%-80% of the loan will need to have something to collateralize or guarantee it for you. This is usually real estate or a fixed asset.
Conditions is what the money will be used for. Will the money be used for working capital, additional equipment, or inventory? The lender also will consider the local economic climate and conditions both within your industry and in other industries that could affect your business.
Character is the general impression you make on the lender. This is made up of your experience in running a business, in this industry and the "gut" feeling they have about you.
The TSBDC offers free and confidential one-on-one counseling for existing and start up small businesses. To register for go to www.tsbdc.org.Other contact information - Phone (615) 230-4780 www.volstate.edu/tsbdcThe Tennessee Small Business Development Center Network is funded by the U.S. Small Business Administration and local community donors.
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