The Five C’s of Credit for Securing a Small Business Loan in Alamo

Congratulations! You’re taking life by the horns by starting your own business and becoming your own boss. You have a solid idea and business plan in hand and are ready to get the ball rolling. Now, you need some capital to start your company, right? Well, before you go any further, have you looked over your five C’s of credit? The Alamo Economic Development Corporation (EDC) will provide some help with this topic.

What Are the Five C’s of Credit?

By now, you should have a business plan that you’ve repeatedly looked over and are ready to present to any lender. So, in order to secure capital, a bank or lender will look over the five C’s, which include the following below.

Capacity

This refers to the borrower’s ability to repay a banknote. Banks calculate this by comparing the borrower’s income to their debts in a debt-to-income ratio. Lenders will also look at the borrower’s job stability.

Collateral

This refers to any property or assets a borrower can offer to lenders to secure a banknote. Collateral can include:

  • Property
  • Equipment
  • Cash
  • Inventory
  • Accounts payable

Capital

Capital means the amount of money your company has to work with. Banks and lenders consider companies with high capital to less likely default on their notes.

Character

This refers to the track record of repaying debt, how much one has borrowed in the past, and if the note was repaid on time. This is mostly information that can be found on the borrower’s credit report. Past liens, collection accounts, and bankruptcies (if any) will also be reviewed.

Conditions

The conditions of a loan, such as the amount and interest rate, can determine if a bank or lender will make an offer. This can also refer to how the borrower intends to use the banknote. Other factors include the state of the economy, industry trends, and/or pending legislative changes.

Start Your Business in Alamo!

The Alamo EDC knows that these five C’s can help your chances of securing a loan for your small business. Contact our EDC in Alamo today for more information on how we can help you.

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