Monday, September 24, 2012

Have You Got the 5 C’s to Get a Business Loan? (1st of a 3-part Business Loan Series)

Have You Got the 5 C’s to Get a Business Loan?

Are you trying to get a loan from a bank? Find out how qualified you are to obtain a loan to finance your business:

Character: What is your reputation? Can you be trusted? Are you a reputable member of the business community? Banks will check on your creditworthiness with relevant authorities such as CCRIS and CTOS in Malaysia. Trust is an important factor in reviewing a loan application.

Capacity: What is your ability to make repayments on a timely basis? How is your past borrowing track record like?  The bank wants to know your current cash flow situation to substantiate your monthly commitments. Are there any other sources of income to support your capacity to repay the loan?  This is the most important consideration in approving a loan application.

Capital: How much have you invested in the business? It is a reflection of your commitment to your business. The more you have invested in the business, the more confidence you have in your own business. It will also boost the confidence of the bank to lend you money.

Conditions:  The bank is interested to know how competitive your business is within the same industry. Is your business able to sustain when the economy is down? The bank is interested to know how strong your business is in withstanding the challenges ahead.

Collateral: Do not think that when you can pledge something to the bank, you will get a bank loan. This is their last consideration after satisfactorily scrutinizing the other 4 C’s.
The bank is only interested to do business and earn interest income.  However, the assets of your business such as land and buildings are good to secure your loan.

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