In deciding to initiate a small business firm, an owner will look
to loans or credit to fund the start up or expansion of the business
due to the financial burden. There are six C's of credit that a business
owner should have to ensure qualification for credit or a loan.
:
Character
The first thing the lender judges will focus on is your character
and dependability. Your character should exemplify trustworthiness
and you should have no unlawful financial disputes in your history,
and you must ensure that all previous debts and credits have been
fully paid. The key factors for character include:
A proper account of the business owner
No involvement in illegitimate activities
Reference and resources
No out standing debts
Capability
You must prove your capability to the lender when you request for
credit, assuring them of your ability to run a successful business.
Good marketing and promotional skills can help a great deal in this
regard. If you have limited experience, getting credit can be a relatively
difficult task. The factors that need to be considered here are:
The successful promotion of expertise
Effective advertising skills
Marketing mechanism
Credibility
IInvestors are always interested in the credibility of your business
before issuing you any credit. You must fully comprehend the capacity
of your business and its potential impact before seeking any kind
of credit. Failure to prove the credibility of your business can result
in the rejection of your loan.
Collateral
Collateral is necessary for banks to give credit. Most of the time
the collateral will be personal belongings which have some financial
value such as a car or a house. Many banks want the collateral to
be large to cover the losses if your business fails to return the
money owed.
Context
The context of your small business greatly influences the manner in
which you get credit. Most banks are interested in small businesses
that are offering something unique or new to the market place.
Conditions
The conditions on which credit is requested for is very important.
Repayment, current financial status of the small business and possible
business growth opportunities are conditions which need to be considered
before credit is issued to a small business.
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