We have been discussing how lenders and the SBA use the Five Cs of Credit when assessing a 504 loan application: Character, Capacity, Capital, Collateral and Conditions. The quality of Collateral refers to the asset or assets a borrower pledges to secure a loan.
We have been discussing how lenders and the SBA use the Five Cs of Credit when assessing a 504 loan application: Character, Capacity, Capital, Conditions and Collateral. The quality of Capital refers to the amount of money personally invested by the owners and is an indication of how much owners have at risk should the business fail.
This week we continue to examine the Five Cs of Credit and how lenders will assess your 504 loan application. The Five Cs are Character, Capacity, Capital, Conditions and Collateral. We previously discussed the quality of character and today we will discuss capacity and why it matters in the lending process.
We have discussed what types of information lenders and the SBA require when applying for a 504 loan, but how do they evaluate the information? Although every lending situation is different, most lenders use the Five Cs of Credit when assessing your loan application. These are Character, Capacity, Capital, Conditions and Collateral. We will examine each of these areas and why they matter in the lending environment.
Previously on our blog, we have detailed the steps in preparing for an SBA 504 loan. We identified the crucial information needed for a successful application and outlined the elements of a solid business plan. However, you might not know that there is an extensive network of Small Business Development Centers eager to assist you in gathering and understanding the information necessary for your 504 loan. Even more exciting, consulting services are free of charge and training services cost very little.
