In the world of business, things may get out of control in the least possible time, thereby leaving you with little or no time to react to the disaster. In such trying times, you need to exercise your leadership qualities to steer your company out of the financial turmoil. Thankfully, there’s an easy way to remember what matters the most when you’re thinking about applying for a commercial loan. All the important words for your checklist start with the letter “C.” Be able to check off all the “C’s” before you leap into applying for your commercial loan and you’ll come out on top.

1.        Credit Score

A low credit score can hinder a lot of financial upward mobility in life. There are plenty of ways to increase your score, and there are a lot of willing and qualified people who can advise you on bumping up your score. Tools like CreditKarma will help you determine your score quickly and in most cases for free, and then offer robust ways to go about improving it. Such websites are informative and user-friendly. Another online tool to use when considering your commercial loan qualification is the debt snowball calculator. Most sources agree that you will need a credit score of about 680 to qualify for a commercial loan. Under 700 and you probably won’t qualify for a loan from a bank. But with the demand for a commercial loan in florida alone that helped to create a digital lending market size valued at $4.35 in 2019 (and estimated to rise to $13.89 billion by 2027), there are other ways to get a loan and plenty of subprime lenders who can help get you subprime loans.

But your credit score can be improved by applying different tactics and avoiding different hazardous practices. You’re lucky enough to exist in this age as there is a host of online companies that can get you in touch with a real person who can help you boost your possibilities.

2.      Capacity to Pay

Obviously this is the whole point for a lender. Are you able to pay back your loan with interest? That’s the bottom line, and a lender is going to overturn every “rock” in your business and finances to know whether you are able to do that. Every lender will want to do commercial loan calculations to determine the right numbers for your loan. How much you can afford and how much you can pay back each month. Does your business have enough profitability to afford higher monthly payments? Obviously, the last thing you want to happen for your loan is to go into default because you couldn’t pay your monthly fees. Lenders want assurance that your business makes enough cash flow that you can pay back the loan in full. When seeking out a lender, be prepared to answer all the questions about your business’s financial metrics, debt and liquidity ratios, cash flow and your borrowing history. All of this will go into the pot when a lender determines whether to give you a commercial loan. The truth is, a bank will be stringent about cash flow gaps, but an online lender might be more willing to make allowances. If you still want to go with a local bank, you’ll need to pay down your current debts before applying for a loan. Use online tools like debt snowball calculator to help you stay motivated to pay off current debt before applying for a new loan.

3.      Capital

It would make sense that the business you own and love is like your baby. It is your brainchild and you would leave no stone unturned to make it a success story. You are completely invested in its health and wellness and would want to take all the stringent measures to ensure it continues to prosper. When you run a business that was your idea, you find every emotional and mental tie to it and you are determined to see it make the headlines for the right reasons. This is all very important for lenders to see in action, especially if you’ve used your own personal savings to boost the business. According to the Small Business Administration, 60% of small business owners use their personal savings to start their business. It’s vital that you keep good paper or electronic records of your “skin in the game.” Lenders want to know that you are not only committed mentally and emotional to your business but also with your own wallet.

4.      Collateral

Collateral refers to your assets that are used to guarantee or secure your loan. There’s no doubt about it, risk is involved when getting a commercial loan. You are gambling on your business’s success, so lenders will want any way they can to pay back the debt if you default. That can be actual assets that you own such as real estate, automobiles or equipment. Even the borrower’s home could be considered a collateral as well as cash accounts. You’ll need to consider what you own that could be considered collateral for your business loan. However a word of caution, make sure you have completely accounted for the risk of not getting your goods/items back if you default on the loan. When you start discussing collateral, let it be a warning to you that you should get legal counsel on this matter beforehand. If a lender starts collecting and demands your remittance, you’ll want to have all things in good standing legally. If you pledge an asset, your lender has the legal right to seize that asset if you can’t pay the loan back. Lenders do not want your home, they want you to repay your loan. But a pledge of major assets is a way of securing that you will in fact pay back your loan.

5.      Character

Above all, there is a “C” word that matters enormously to lenders and that’s your character as a borrower. If you want to borrow from a local bank, build a relationship with the manager and employees. Make every effort for them to know about your business and be invited into it. If your business is a brick and mortar, go out of your way to invite in bank employees. You want the bank to follow your small business progress, so that when you walk through the door ready to apply for a commercial loan, your strong character is well known. Your good character is established through your credit history, your credentials and your reputation as a local business owner. Go out of your way to associate with other lenders and be reputable. This will go a long way in securing you a reputation of a worthy borrower. You want to make yourself someone worth lending to, and that is entirely in your control. 

Now you are aware of all the crucial “C” words that can play a central role in the success of your loan application. Whether you need a loan or not, make sure to establish a great credit score, keep reserves to pay for big orders or emergency loans, have enough capital available for future expansions, build collateral to use during taxing times, and construct a great character with the local banks officials. This would help you in getting the much-needed financial injection when your business needs it to surviv