Before you approach a lending institution, it is important to be aware of the personal elements lenders consider. Banks will typically use the following Five C’s:
- CREDIT – Do you have a successful financial track record, or are you working to improve? Consumer Credit Counseling Services will provide you with tools and expertise to address any credit issues you might have.
- COLLATERAL – Do you have assets to secure your loan? Do you have a co-signer or guarantor in mind? Click here to learn more about securing your loan.
- CHARACTER – Do you have experience in the industry? Do you display professionalism and follow up in a timely manner?
- CASH FLOW – Can you demonstrate your ability to repay the loan? Click here to see a detailed description of cash flow.
- CONDITIONS – Examines the environment in which you’ll be operating.
Planning Your Business
Once you have completed your personal preparation, small business lending experts recommend you have the following elements in place before meeting with bankers:
- If you are considering starting a new business, begin with the SBA’s small business assessment tool.
- Business Plan (clearly describing your company, analyzing the market, explaining products and services and explaining how you intend to operate). The SBA outlines and describes key elements of a business plan here.
- Financial documents including personal financial statement, balance sheet and P&L statement. SCORE provides a downloadable templates for each at this site.
- Financial projections that realistically demonstrate your ability to repay the funds borrowed. See SCORE’s downloadable template.
- Clear definition of the primary and secondary forms of repayment.
- You many also want to consider creating an advisory council or find a mentor in your industry.