As a small business owner, you owe it to the business to decide whether your lender is right for your business or not. Banks and lending institutions use five factors to grant credit to you or your business and these are:
Capacity
Your ability to repay the loan. They look at your cash flow and your expected business performance over time to see whether you have the ability now and in the future to be able to keep up with the loan payments.
Character
Simply speaking, this has to do with your credit history and your personal history. The basic question they ask themselves is: “Are you the kind of person they want to do business with?”
Collateral
When all else fails, and you can no longer make the payments, what can they take from you to offset the money still owing them
Capital
Simply what is your net worth and the more it is, the more they will consider that you can borrow.
Conditions
The current economic environment, the state of your small business and your personal status and how that will together impact your ability to repay the loan.
Now lets turn that around and use the same factors to find out whether that lender is right for you.
Capacity
Is the loan the right size and will it be enough for what you need to get done at the moment.
Character
Do the terms match your business needs at the moment. Are the fees and payment schedule right for you, now and in the future?
Collateral
Are there any side benefits that accompany the loan. Are there any credit card processing facilities or other capabilities that can be made accessible to your small business?
Capital
Is the lender able to support your financing needs if you grow and expand very quickly?
Conditions
Is this lender able to support your business sector and size regardless of the change in market conditions?