What Creditors Want to See

A good credit rating can make or break you personally. Likewise it can make or break your business. Often small businesses run on personal credit lines. Keeping your and your business’s credit rating in good standing is important for operations, growth and development.

When lenders look at your business, they will consider the four C’s:

1.  Condition of Business

Are your industry and your company profitable—or likely to stay profitable? How long have you been in business and what has the condition of your business been?

2.  Character

What is your credit history, your experience in your company’s industry, your ability to manage a loan? Has your business taken a loan in the past? What has the payment history been? Have you defaulted on any loans?

3.  Capacity to Repay

Is your projected income sufficient to make a profit, maintain healthy cash flow and pay off the loan? Do you have sufficient sources of income?

4.  Collateral

Do you have enough assets or collateral to sell if necessary in order to repay the loan?

Additionally, lenders want to see your business plan. It does not need to be your full-length business plan, but it should cover what your business does, what is your competitive advantage, what your projected earnings are and when you intend to repay any loans.

Be sure to separate personal and business expenses. Establish company credit with a credit card. You can use a certificate of deposit as collateral or apply for a secure credit card if you are applying for your business’s first credit card. Pay company purchases with a business credit card, not your personal card.

It’s just as important to keep your company credit cards in good standing as it is to keep your personal cards. Avoid spending to your maximum and pay your accounts in full and on time.