How to Master the 5 C's of Business Bank Loans

Business loans
Commercial lending
SBA loans
Business lines of credit
Jim Reed, EVP, North Region Commercial Executive
Coworkers looking at chart and discussing

Business loans are back in play. The economy is on the upswing, businesses are again interested in investing and banks are eager to lend to qualified candidates. This adds up to a borrower’s market.

If you are thinking about applying for a business loan, familiarize yourself with these five loan criteria (5 C’s), and be ready to discuss them with your banker:

Capacity: Capacity evaluates whether you can repay a loan. Do you have cash flow to make a payment? If your business is profitable, that’s a strong indicator that you have capacity. For an individual, be prepared to share personal financial statements for similar evaluation.

Capital: Capital means you are invested in the business and have some skin in the game. It’s OK to have debt, but at the end of the day you should also have equity in the firm.

Collateral: Collateral looks at assets that will secure the loan, like inventory, equipment or accounts receivable. As the Small Business Administration (SBA) Seattle District Community Lender of the Year for the past two years, Banner Bank, a SBA Preferred Lender, works closely with the SBA in cases where collateral would generally be a concern. This is an underutilized program that more businesses should consider, and we have the experience to help.

Conditions: Why are you seeking a business loan? It's important to be open with your banker so we know all the pertinent information about your company and can better advise our clients.

Character: For Banner Bank, an applicant’s character is paramount. Are you a good operator? Active member of the community? Like you, banks want to do business with reputable companies, and people.

Of course, there are other factors in securing a loan, but preparing your 5 C information goes a long way in advancing the process.

What questions do you have about business loans? Visit our Business Loans page to learn more and connect with a local business banking expert.


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