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5 Most Important Lender Considerations For A Business Loan

5 Most Important Lender Considerations For A Business Loan

The 5 Cs of credit is a system used by lenders to gauge the creditworthiness of potential borrowers and the more you know about it – the more credit you can get and the faster you can grow your business.

The 5 C’s of credit are Capital, Capacity, Collateral, Conditions and Character. Each of the 5 Cs has its own value, and each should be considered important. Having an idea of how finance companies view credit can help you make your company attractive and achieve the financing you need.

1. Capital

When applying for financing they will want to see how much capital is supporting the business to guarantee the business can cash flow the added debt. Providing bank statements or a tax return is a good way to show capital level. Most finance companies will let you know what they need.

2. Conditions

The purpose of the loan, experience, the economy and the amount you’re requesting are factors to be considered when applying. The more attractive these items are – the more likely you’ll be approved. It’s also a good idea to be ready to explain the future potential of the assets you’re financing. What benefit they will have for your business.

3. Capacity

Capacity indicates a borrower’s ability to repay their loan based on the borrower’s income and income stability. This is a little different than the capital you have – it’s your ability to have consistent revenue. The lender does not want the borrower to be over stretched. A high debt to income ratio will be viewed as a high risk.

4. Collateral

Collateral is the asset the lender has until you re-pay the loan. For businesses, this is usually equipment. When you provide good collateral, with income potential, it demonstrates security for the bank.

5. Character

Character can best be determined by the borrower’s credit history or score. The purpose of this is to determine whether the applicant is responsible and likely to make on-time payments on loans and other debts. They may consider the borrower’s work experience, references, credentials and overall reputation. So keeping your credit score high by meeting your current obligations is your character… on paper.

The Bottom Line

To ensure the best credit terms, your financing approval, and the ability to grow your business with debt finance, consider your character, capacity to make payments, collateral on hand, capital available for upfront deposits and initial payments, and conditions prevalent in the market.


We have unsurpassed response times and our clients notice how simple & efficient a financing activity can be working with us. Acquiring new equipment isn’t always the easiest, but working with Brickhouse capital—we will keep your goals in mind. With over 18 years of experience and our supportive customer service we can help you with your equipment needs to grow your business. Start the conversation today