Starting a Business For Dummies, 4th Edition

Part II

Making and Funding Your Plan

Addressing the Five Cs

Bankers like to speak of the five Cs of credit analysis, factors they look at when they evaluate a loan request. When applying to a bank for a loan, prepare to address the following points:

• Capacity: This is a prediction of the borrower’s ability to repay the loan. For a new business, bankers look at the business plan. For an existing business, bankers consider financial statements and industry trends.
• Capital: Bankers scrutinise a borrower’s net worth, the amount by which assets exceed debts.
• Character: Bankers lend money to borrowers who appear honest and who have a good credit history. Before you apply for a loan, it makes sense to obtain a copy of your credit report and clean up any problems.
• Collateral: Bankers generally want a borrower to pledge an asset that can be sold to pay off the loan if the borrower lacks funds.
• Conditions: Whether bankers give a loan can be influenced by the current economic climate as well as by the amount requested.

Head online and visit www.dummies.com/extras/startingabusinessuk for a free bonus article that looks at the measurable part of a business plan – the objectives.

In this part …

• Get the best legal structure in place.
• Write a winning business plan.
• Find out all about money – ...