The Five C’s of Borrowing Money

The Five C’s of Borrowing Money

There is a specific responsibility that business owners have to manage their business and doing the best possible job of treating their stakeholders, mainly their customers and employees with respect.

Business owners also have the added responsibility of managing and maintaining the company’s finances to maximize revenues. When the business takes a turn for the worse, and the owner is faced with a financial crisis, they may be left with no other viable options other than to borrow capital.

Whether your business is small or large, it may experience financial troubles at one time or another. As a business owner with a lot to manage, it may be time to consider getting a business loan to turn your circumstances around.

Financial professionals handling your loan processing will generally make the final decision in determining the eligibility of your business. They will often use the five C’s to qualify your business for a loan.

A lender will work to review your business financial records and use the Five C’s to determine if the business will be granted loan approval.

Capital and Assets
Capital in a business can include anything tangible that is of value from the company itself to equipment and property. When lenders consider the wealth of the company, they are looking at the net worth. Net worth helps them determine the best possible loan offer to present to the business owner.

Character
In addition to checking the business financial records, the lender will also review the records of the business owner by checking business activities and credit history.

They may require personal details of the business owner, such as social security number, residential address, and date of birth, to provide an additional level of verification for the loan.

The lender may look at your history of business loans and on-time payments to be sure the loans were paid per the agreement.

Collateral
Collateral is an asset that secures repayment of the loan. Depending on the terms of the loan, and if your business loan is at a higher risk, the lender may require collateral before extending a loan offer.

Repaying the business loan according to the terms of the agreement will ensure your collateral will not be seized by the lender but returned at the end of the loan repayment.

Capacity
Capacity is your business’ ability to pay back the loan and generally involves the amount of capital or revenue your business generates. The income generated from your business will be considered when your loan is initiated. The lender will determine the amount of your loan based on capacity.

Lenders will review capacity by accessing your bank statements, accounts payable records, and other financial documents that can access your ability to repay the loan.

They will also look at your business’ current ratio of debt before approving the loan.

Conditions
Lenders often review the conditions affecting your business as with how well your company has performed over the past year in terms of cash flow, revenue, debts, and property value to determine the best possible loan offer for your business.

Many business lending companies will combine the Five C’s with their unique lending and evaluation strategies to offer you a loan to help your business recover from unexpected financial trouble. It helps them determine your company’s financial condition and your ability to repay the loan.

A merchant cash advance is a business loan alternative that can help your business upgrade technology, purchase more merchandise, or even pay outstanding debts.

If your business requires a merchant cash advance for extra capital, try a quick and easy business loan alternative that helps you obtain the cash your company needs. Find out more from Vader Mountain Capital today.

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