Business Loans: The 5 Cs To Improve Your Borrowing Approval.
It's exciting seeing your Fitness Business is grow!!
What to do if you need a loan to help fund that growth?
Below are the 5Cs to improve your chances of Business Loan Approval:
5 Cs:
#1. CAPACITY
This is #1 for a reason...your ability to repay the loan from the cash flows of your business plan is crucial!
#2. CAPITAL
What is your skin in the game?
Banks look for your personal investment in the business...
...what are your risks if things don’t work out??
If you aren’t taking any risk…why would they?
#3. COLLATERAL
What you are offering the bank in the event that you default?
Commonly this is an asset like your home or building you own.
If you can not pay back the loan, the bank will take ownership of your collateral.
#4. CONDITIONS
This has 2 components.
The conditions of the loan itself: What are you planning to use the money for?
The conditions of the economy: Is your industry doing well or struggling? Is the area of your business growing or declining? Etc
#5. CHARACTER
This is more subjective...basically your willingness to pay back the loan.
If your business if profitable & cash flowing...and you COULD repay the loan…WILL YOU?
This is the reason that I recommend that you build relationships with your local business banker BEFORE you ever need a loan.
You want them in your corner throughout the process…knowing about YOU and your business.
CONCLUSION:
It is important to note...banks are in the business of lending money and you paying them back.
That might sound obvious…
...however, many think that if they have enough collateral the bank will agree to the loan.
That is not always the case!
It costs the bank time & money to go through the legal process to COLLECT on that COLLATERAL.
They would much rather you just make your payments according to the agreed upon loan terms.
For that reason, your CAPACITY to make the payments with your business plan will carry much more weight than your collateral.
Looking to Apply for a loan and need to put your numbers together for the bank??
My team can HELP YOU!
Schedule a FREE Consultation HERE!!
Best
Pat
Disclaimer: This is meant to be educational. This is NOT advice for your specific situation. Please consult a qualified business banker and qualified financial professional before taking on any business loans.