What criteria do banks use in either approving or denying a small business loan?
A. Bankers generally evaluate a loan package based on the 5 Cs of Credit. Their criteria are as follows: Capital: The equity injection in your project. Lenders are almost never willing to finance 100 percent of the money required to begin a business or to expand an existing business. Just as one must make a down payment when purchasing a house or automobile, the borrower must make this down payment of capital when obtaining a business loan. Collateral: Assets that are pledged by the borrower to secure a loan. In the event that the borrower is unable to repay the debt, the lender can exercise its claim on the property pledged as collateral and sell it to recover the amount of the loan. Cash Flow: This is the ability of the borrower to repay the loan. The lender determines this by reviewing the projected financial statements that the borrower must provide. Character: Character is a very important part of the financing process, and includes such qualities as work experience, honesty, inte
