🖐🖐🖐The 5 "C's of credit. 🖐🖐🖐
Your credit score is a major factor in your eligibility for a business loan, but it’s not the only factor. You should also understand the “5 C’s of Credit” that describe how your application will be evaluated and reveal what else might help you secure that loan.
Character. Character includes your credit history and score.
Capacity. Capacity describes your ability to repay the loan. Lenders will use your debt-to-income ratio and cash flow statements to learn how your revenue stacks up against your outstanding debts.
Capital. Capital shows the investments you’ve made in your business. Lenders want to be sure you won’t default on your loan. They’re looking for commitment and dedication. If you have had a substantial investment in something it tells a lender you’re serious about the success of your business.
Collateral. Collateral is all about assets. Anything the lender could repossess if you default. Those assets might include real estate, equipment, inventory, or accounts receivable.
Conditions. Conditions describes how you’ll use your loan and the broader context of your financial need. Lenders want to see you’ve got a specific purpose for your loan and a vision for growing your business with this capital.