Collateral or guarantees are additional forms of security you can provide the lender. If the business cannot repay its loan, the bank wants to know there is a second source of repayment. Conditions focus on the intended purpose of the loan. Character is the personal impression you make on the potential lender or investor.
Your bank is in business to make money. Consequently, when a bank lends money it wants to ensure that it will be paid back. The bank considers the 5 “C’s” of Credit each time it makes a loan.
Capacity to repay is the most critical of the five factors. Capital is the money you personally have invested in the business and is an indication of how much you will lose should the business fail. ..
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