5.2 Applying for a bank loan
Barrow (2011, p.149) refers to ‘the five Cs of credit analysis’, i.e. the factors that a bank looks at when evaluating a loan request. He recommends that when applying for a bank loan you prepare to address the points given in Table 3.
| Capacity | A prediction of your ability to repay the loan. To do this, lenders will look at your business plan and/or financial statements and industry trends. |
|---|---|
| Capital | Lenders will scrutinise the amount by which your assets exceed your debts. |
| Character | Do you appear honest and have a good credit history? If you are applying in person, dress appropriately as you would for a job interview. |
| Collateral | What assets will you pledge to sell to pay off your loan if you fall on hard times, for example, property or business assets? |
| Conditions | What is the current economic climate? This can have an impact as well as the amount you request. |
Different organisations will have different funding application processes, but if you use the advice included in these sections, and pay close attention to any criteria and instructions provided, you will improve your chances of making a successful application.