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credit 5 c's

Year after year and survey after survey, small business owners list access to funding as the most challenging part of growing their business. To improve your chances of getting financing here’s what every lender looks at:


Simply put, this is your reputation. When lenders evaluate character, they look at stability — for example, how long you’ve lived at your current address, how long you’ve been in your current job, and whether you have a good record of paying your bills on time and in full. If you want a loan for your business, the lender will consider your experience and track record in your business and industry to evaluate how trustworthy you are to repay. These days, social media profiles, activity, comments, and review of your business make it much easier to measure the “character” of you and your business.


This is arguably the most important factor a lender will consider in deciding whether to lend you money. It is essentially whether you have the capacity (ability) to repay the loan. Many lenders have sophisticated debt to equity models but for the most part your current bank statements illustrate how/if you can repay the loan. For example if your average monthly ending balance is $1,000 and the loan repayment is $3,000 per month you probably won’t qualify.


Capital refers to the value of your assets minus your liabilities. In simple terms, how much you own minus how much you owe. The more capital/investment in your business – referred to as “skin in the game” – the better your chances of getting financing.


In most cases the loan applicant will be asked what assets he/she can provide to secure the loan. For example, if you own a home, car, or other personal assets, those will be considered when a lender decides whether to grant your loan request. The more collateral you have, the more willing a lender will be to lend you money.


Lenders consider a number of outside circumstances that may affect the borrower’s financial situation and ability to repay, for example what’s happening in the local economy. If the borrower is a business, the lender may evaluate the financial health of the borrower’s industry, their local market, and competition.

Although every lender looks at the 5 C’s of Credit some – like Company Capital – tend to rely on the performance of the business rather than the personal investment of the business owner.

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