Even with numerous banking and financial lending organizations around, it’s still not easy to procure a business loan for your small business. And as simple as it is, your small business expansion plans may remain a far fetched dream if you don’t have the funds to support your business plan. To increase your odds of getting a loan from any lending institution you need to work on the three C’s on which the financial institutions rate you fit or unfit for a loan.
In general you would interpret character as being devoid of any criminal cases pending against a person. But a businesses character is judged by more than its involvement in anything illegal or antisocial. What the banker wants to be sure about is that your small business won’t disappear without paying back the loan amount, or that your business will not be forced to shut down for malpractices while the loan payments are still midway.
The businesses character is judged by how you work with both your customers or clients and your suppliers and how well are your business and business policies perceived by all those who interact with your business. In case of small businesses the proprietor’s character, is also accounted for while judging its character.
The second thing a banker would want to check before giving your small business a loan is your and your businesses credit history. They will take a deep look at how have you handled your earlier loans, have you been regular with loan payments, do you timely clear your accounts with your suppliers and that you or your business have never been involved in any financial scams.
The bankers have direct access to databases of different credit rating agencies, that maintain a clear record of all your earlier borrowings, credits and the payments or settlements that you have made. If there is even one incident of delayed payment or no payment in the last three years, your loan application may be rejected.
And last, but definitely not the least, every lending institution wants to have collateral as a security to guard the amount you are being given as a loan to your small business. The collateral can be anything from land to office building to equipment. But by and large the collateral has to be an immovable asset which is of a higher value than the loan being given. Although in some cases collateral of a slightly lesser value may be accepted but that’s only if you score high on the other C’s.