The 5 Cs of Credit: Successfully Obtaining a Business Loan

Bag-of-MoneyAll business owners know that Cash is the life-blood of their business.  Maintaining a good relationship with their banker and a healthy Line-of-Credit is vital.  Many business owners ask, “What will the bank look for to loan my business money?”  Most bankers look at “The 5 C’s of Credit” which are:

• Character
• Cash Flow
• Collateral
• Capitalization, and
• Conditions (Economic)


Character is evidence of your Willingness to pay back your loan… A good credit report.

Cash Flow is your company’s Capacity to pay back your loan. A conservative guideline is that you should have $2 of income for every $1 of debt.

Collateral is how lenders get their money back if the business fails. They secure their loan against your assets to protect against this “Worst-Case Scenario”.

Capitalization is how much money you’ve put back into your business.  Bankers want to see that you have a financial commitment and that you’ve put yourself at risk in your own company. And,

Economic Conditions The banker evaluates the current economic conditions and how they will affect your company.

That’s the ‘Waterfront’ on the 5 Cs of Credit. There’s a lot more to learn — if you’d like to talk further, give me a call.

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