Are you trying to get a loan or line of credit for your small business? Then you need to know what bankers are thinking when they consider your application. One key to success in obtaining the financing you need is to understand the “six C’s of credit.” Here’s a closer look:
1. Character: Bankers will consider your personal character, which includes both your personal and business credit history.
2. Capacity: Does your business have the ability to repay the money you are borrowing?
3. Capital: How much capital do you and your business already have?
4. Collateral: Collateral is extremely important in getting a small business loan. The bank will want to see that, in case the profits you project from the business don’t pan out, you have a “backup plan” for how they will get repaid.
5. Conditions: This refers to the loan terms, including how much you are requesting, the length of the loan and the purpose you intend to use the money for.
6. Cash Flow: Last, but not least, bankers will want to know how the loan or line of credit will affect your business’s cash flow.