credit

Community Business Finance is thankful for the opportunity to offer affordable financing to small businesses in Texas and Louisiana. Our mission is to encourage economic development, and we are dedicated to borrower education about the underutilized 504 Loan Program. As a dynamic resource for our communities, we have created a library of information to help borrowers understand the 504 Loan Program and prepare them for a successful loan outcome.

Community Business Finance's mission is to encourage economic development throughout Texas and Louisiana. In carrying out this mission, we are dedicated to borrower education and seek to inform businesses about the underutilized 504 Loan Program. As a dynamic resource for our communities, we have created a library of information to help borrowers understand the 504 Loan Program and prepare them for a successful loan outcome.

Community Business Finance's mission is to encourage economic development throughout Texas and Louisiana. In carrying out this mission, we are dedicated to borrower education and seek to inform businesses about the underutilized 504 Loan Program. As a dynamic resource for our communities, we have created a library of information to help borrowers understand the 504 Loan Program and prepare them for a successful loan outcome.

The first 4 Cs of Credit – character, capacity, capital, and collateral – all deal with a company's financial history or current state of affairs. One would think a clean past and current financial strength would make lenders eager to produce a 504 loan, or any business loan. However, lenders are also concerned with the future, and how the future economic outlook may affect your business.

Today's topic is collateral, one of the 5 Cs of Credit that lenders use to determine their level of risk when offering a 504 loan, or any business loan. You may be thinking, "I've checked my credit reports and made sure my character hasn't been damaged. My business has good cash flow (capacity), and I've got plenty of skin in the game (capital). What more could a lender want?" Lenders do want more; they want collateral.

To better understand capital, and its role in the 504 Loan Program, we must first explore the relationship between risk and return. This relationship is a fundamental idea in finance. Investors risk their money when buying stocks, on the chance of a reward in dividends. Lenders take a risk when loaning money to a business. The return on their risk is the interest paid on the loan.

There are many aspects of business that create a company's success, such as a solid business plan and available lines of credit. However, when determining the financial health of a business, cash is king! We've all heard the phrase "cash is king" but what does it really mean when you are applying for a 504 loan?

In his play Romeo and Juliet, Shakespeare asks the question, "What's in a name?" When you need business financing, such as a 504 Loan, it turns out your name is worth a great deal. Lenders decide if you are a good risk by assessing your credit. Although every lending situation is different, most lenders use the Five Cs of Credit to determine the level of risk.