The 5 C’s of Credit are 5 characteristics Savoy Bank uses to evaluate potential borrowers. Discover what the 5 C’s of Credit are - and how your business stacks up as a potential borrower.
SEEKING A LOAN? GET YOUR FINANCIAL STATEMENTS IN ORDER
BY MARILYN J. MAGETT
When seeking a business loan, one of the best things you can do to improve your chances of securing credit is ensuring that your financial statements are in order and presented in a way that makes your company look good. Financial statements are how banks evaluate a company’s health and manage their risk when providing loans. Unfortunately, many business owners sabotage their credit applications with sloppy financial statements.
How much working capital does your business need? Most business owners who want to determine their working capital needs ask themselves a simple question: “Do I or will I have enough money to pay my bills and payroll this month?” If the answer is yes, they think the business has enough working capital. If the answer is no, the owner starts to think about getting a loan or line or credit.
Embedded in today’s complex web of mortgage conduits, mezzanine loans, limited partnerships, opportunity zones and sovereign wealth funds is a simple time-tested source of capital for small business entrepreneurs that tends to become invisible: the Small Business Administration loan.
Smaller to mid- sized businesses work harder, dig deeper to use their hard-earned money wisely - from finding creative ways to control inventory to redeeming membership rewards for business purchases. Most of these same businesses keep funds in an operating account to cover payables, payroll, rent and other monthly expenses. For many, this account is not viewed as a source of income and daily balances lay stagnant doing nothing for their business.
Loans guaranteed by the Small Business Administration are a vital source of entrepreneurial business funding. In 2017, more than 68,000 SBA-approved loans provided around $30 billion in working capital, asset financing, export support and loan refinancing. Indications are that those numbers will be even higher this year. And yet, despite these facts, many small business owners remain misinformed about what SBA loans are and what it takes to qualify for them.
Qualifying for a conventional business loan can be difficult especially for small to mid-sized businesses and organizations. But for businesses that are committed to promoting the economic development of an underserved area, a community development bank may be an ideal financial partner. Community development banks, or community development financial institutions (CDFIs) have a special focus on businesses and organizations serving low-income and economically distressed communities who may have a problem getting a loan from larger banks. CDFIs do not rely as heavily on credit scores; instead, they concentrate on developing long-term relationships with members of the business community in which they reside to help them build credit and drive community revitalization
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