6 Cs BANK WILL CONSIDER BEFORE GIVING YOU BUSINESS LOAN

 Capacity

Lenders will evaluate your business’s financial capacity to support the loan obligation as well as operating expenses. Typically, a business needs to have $1.25 of income to support every $1 of debt service. The extra $0.25 provides a cushion for your business to absorb unexpected expenses or a downturn.

Capital

Your business may own capital assets such as cash and equipment that could be used to support your credit application. You and others may have invested funds in the business too, which is also an important consideration for a lender. The amount of capital assets and equity you have on hand will say a lot about your prospects for receiving financing.

Collateral

Accounts receivable, inventory, cash, equipment and commercial real estate are all forms of collateral — assets lenders may accept to secure loans. When estimating the value of your collateral, a lender will look for liens — existing debt owed — on that collateral. The existence of a lien may disqualify the collateral as a supporting asset for the loan.

Conditions

The state of the economy, industry trends and pending legislation relative to your business are all conditions that are considered by lenders and are factors in the evaluation of your loan application.

Character

Work experience, experience in your industry and personal credit history are all character traits that lenders will consider. Your personal integrity and good standing — and the integrity and standing of those closely tied to the success of the business — are of the utmost importance.

Communication

Your willingness to communicate candidly with your banker and your other advisors about the opportunities and challenges your business faces is key to a productive financial partnership.


Source: Bank of America


https://business.bankofamerica.com/resources/factors-that-impact-loan-decisions-and-how-to-increase-your-approval-odds.html

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