Qualifying for a loan is tough, more so if it’s a business loan. To be more specific, the process may take a while if you haven’t set things straight, even before you pass your application. The lender may see a few holes in your requirements which could affect the outcome. Your vision of a great business may be great, but all of that would amount to nothing if your loan gets rejected. All the time and effort put into gathering the requirements wasted, just because you forgot to focus on some important factors along the way. With all of this being said, you should always remember the 5 C’s in qualifying for a business loan. Keeping these in mind would not only smoothen the process, but it may also provide the lender enough reason to grant you the well-needed fund for your dream venture:
1) Capacity
This would refer to your ability to repay the loan. Remember, the reason why it’s called a loan is because it is basically “borrowed,” so you would need to pay it back in a given amount of time. The lender is going to take a deeper look in your income, they’re going to evaluate your cash flow, whether or not it would be enough to at least provide you with the amount to pay them back on a monthly basis (per your agreement during the process). In short, your “capacity” to deliver what is written on the contract in a timely manner. This also refers to your credit history. They’re going to have a look at your past repayment history, both business and personal. Always indicate every possible source of repayment at your disposal.
2) Collateral
This is basically a form of penalty, just in case you fail to pay back the amount that you had borrowed. This may come in the form of buildings or equipment owned by your small business or by you personally, including your home, car, appliances, etc. Collateral may also include a guarantee by someone else that, just in case you wouldn’t be able to pay back the whole amount, the other person will. Take note that loan guarantees are more known by the other term, “co-signer.”
3) Capital
This refers to the preliminary investment that a business owner must provide, thus giving the lenders a glimpse of his vision and business strategy. It’s only appropriate to provide the lenders an assurance that you will be putting the amount to good use, before they even consider making a business loan. The loan officer will evaluate the amount that the business owner has to offer.
4) Conditions
This is defined as the “overall economic climate and external environment surrounding the bank and the business firm.” If the current economy is at an all-time low, it would be difficult for the borrower to pay back the amount, while at the same time make it difficult for the lender to come up with the amount to be loaned. Conditions may also refer to “the intended purpose of the loan.” Is it for equipment? Is it for supplies used for the business itself? Feel free to provide the complete details to the lender.
5) Character
Are you trustworthy enough to handle the lender’s money? What is your current reputation in the industry? Yes, this may be subjective, but your character would determine the type of business owner you are. If you are found to not handle your past finances and transactions well, the loaning officer may reject your application, seeing that you did not honor past transactions smoothly. The opposite happens if they see you as responsible and reliable business owner. Remember, respect begets respect. The honor that you bring towards your business partners and lenders would be a main motivator for your future transactions and ventures.
After learning the 5 C’s, get a jumpstart on your business venture with a trusted name that offers only the best service possible. Cebuana Lhuillier’s Lucky Loan is definitely your top choice. It is a multi-purpose loan offered to registered entities such as tricycle operators, credit cooperatives and other groups, as well as SMEs such as restaurant and mini groceries, among other businesses. Our network of more than 2,200 Cebuana Lhuillier branches and online presence give customers unlimited access and utter convenience in applying for a loan. Our five-point application to disbursement process ensures services are delivered on time. So what are you waiting for? Visit your nearest Cebuana Lhuillier branch now – we assure a fast, easy and secure transaction.
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