CAPACITY: Does your business have the financial capacity to support debt and expenses? Typically a business needs to have $1.25 of income to support every $1 of debt service. The extra $0.25 provides a cushion for your business to absorb unexpected expenses or a downturn in the economy.
CAPITAL: Your business owns capital assets such as cash and equipment; is there enough to help support the financing you want? You and others may have invested capital in your business; how much? The answers say a lot about whether the business is one in which the lender wants to invest.
COLLATERAL: Equipment, commercial real estate, personal residence, accounts receivable, inventory, cash, are all forms of collateral that lenders leverage to secure loans. In addition to looking at the value of your collateral, the lender will consider any existing debt you may still owe on that collateral.
CONDITIONS: The state of the economy, trends in your industry and pending legislation relative to your business are all conditions that are considered by lenders. These types of factors—often out of your control—may affect your ability to make payments.
CHARACTER: Work experience, experience in your industry and personal credit history are all character traits lenders will consider. Your personal integrity and good standing—and the integrity and standing of those closely tied to the success of the business—are critically important.