Character is the general impression you make on the potential lender or

Character is the general impression you make on the

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Character is the general impression you make on the potential lender or investor. The lender will form a subjective opinion as to whether you are sufficiently trustworthy to repay the loan or generate a return on funds invested in your company. Your educational background and experience in business and in your industry will be reviewed. The quality of your references and the background and experience of your employees also will be taken into consideration. What do the 5 Cs of Credit mean to a small business? One of the most common questions among small business owners seeking financing is, “What will the bank be looking for from me and my business?” While each lending situation is unique, many banks utilize some variation of evaluating the five Cs of credit when making credit decisions: character, capacity, capital, conditions and collateral. 1. Character. What is the character of the company’s management? What is management’s reputation in the industry and the community? Lenders want to put their money with those who have impeccable credentials and references. The way the Page | 1 Source: USAID’s Lending to the Agriculture Sector Toolkit – December 2012
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owner/manager treats employees and customers, the way he or she takes responsibility, timeliness in fulfilling obligations are all part of the character question. This is really about the owner or manager and his/her personal leadership. How the owner or manager conducts business and personal life gives the lender a clue about how he/she is likely to handle leadership as a manager. It’s a banker’s responsibility to look at the downside of making a loan. The owner/manager’s character immediately comes into play if there is a business crisis, for example. Small business owners place their personal stamp on everything that affects their companies. Often, banks do
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