Lenders often use the 5 C’s of Credit when they make decisions on whether or not to give a small business a loan. Here’s the breakdown on the 5 C’s:
1. Character: Does the person have a good history of paying off credit card debt and are they really serious about the business?
2. Capacity: Can the borrower really pay off the loan? What are their financial abilities to do so?
3. Capital: What financial condition are they in and how is it reflected in their financial documents, both personal and business?
4. Collateral: What security or assets does the small business owner possess?
5. Conditions: What are the economic conditions of the business owner’s industry or community? Does it look like a winner?