Understanding the 5 C's of Credit

By: First Union | Date:

business-finance

Understanding the 5 C's of Credit

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When applying for a loan or some form of business credit, lenders tend to focus on five primary factors—what are known as the five c's of credit. So what exactly are these 5 C's…Keep reading to find out more.

Capital

In simplest terms, your capital is your net worth. When it comes to the five c's of credit however, capital involves the money you have to put down on a commercial loan. Kind of like a down payment on a mortgage, the capital represents your down payment. The more you have to put toward the loan, the better the lender will be to consider financing you.

Collateral

When applying for a business loan you may be required to pledge certain assets. If then you default or fail to pay, the lender has the right to seize such assets. Loans that are backed by collateral are considered secured loans—again, this equates to less risk for the lender, so if you can show that you have collateral, you have a better chance of receiving the loan.

Character

There is no hard and fast formula for assessing character. But lenders will check out things such as company history, reviews, transparency. Ultimately, they want to know they're going into business with a credible and trustworthy company. They will also take into consideration here factors such as FICO, any past liens and/or judgments, as well as years in business.

Conditions

This has to do with the loan itself; in other words, it looks at the amount financed, interest rate and duration of repayment. Essentially, the lender is evaluating your ability to repay given the terms of the actual loan in question.

Capacity

In terms of your capacity to repay, you want to take a close look and honestly decide whether or not your business is in a position to take on a loan. Check out your debt-to-income ratio. Given the current amount of debt you have, can your company tolerate even more? Again, be honest in your assessment.

First Union Lending is in the business of helping small companies get the funds they need for whatever project they may have in mind. Call today and let's get started!

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First Union Lending LLC is a dually licensed Lender/Broker with its main offices located at 4900 Millenia Blvd First Floor Orlando, FL 32839. First Union Lending LLC and its ads are meant for continental United States, including Alaska and Hawaii small business owners. Business Loans offered by First Union Lending LLC have varying rates and terms that can range from 30 - 120 payments and all rates and terms are based on eligibility of the business and its owners. The actual terms are based on credit, business history, industry, amount and terms. As an example, a $5,000 loan paid over 5 years at 8% would have a total repayment of $6,082.92 over the life of the loan. We use the latest encryption to protect sensitive information transmitted online, as well as run our own secure server network to ensure your information is protected offline as well.

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