The 5 C's Every Small Business Startup Needs to Know

“Financially Fit” is a column published by RCB Bank to help you gain knowledge on all things financial. Fitness guides – RCB Bank professionals in the field – offer ideas to help you strengthen your money sense, customize savings training, and provide qu

By: David Goodwin, RCB Bank Lender | Category: Financial Services | Issue: January 2016

Phil and Betty Narotam, owners of Baskin Robbins in Owasso, celebrated the first anniversary of their store in December.

Phil and Betty Narotam, owners of Baskin Robbins in Owasso, celebrated the first anniversary of their store in December.

Is 2016 the year you have resolved to start your own business? I suggest you get to know four people: a banker, a CPA, an insurance agent and an attorney. Building good relationships with these invaluable resources will help you and your business succeed.
Now, let’s talk about applying for your business loan. It’s important to do your homework and prepare a solid business plan before you request a loan. A lender’s main concern is, are you going to be able to repay the loan? You need to be clear on how you plan to build and sustain your business.
When deciding to loan you money, most lenders look at the five C’s.
• Credit – Your credit report is a detailed list of your credit history and provides insight on how you manage credit and make payments. Lenders are looking to see if you pay back your creditors.
• Capacity – Do you have the means to repay your loan? How much debt do you have compared to how much you earn? Lenders want to know if you can comfortably manage your loan payments.
• Character – Character is tough for a lender to assess in the brief time loans are considered. This is where a good-standing relationship with a banker, who is likely to be your lender, is beneficial. They want to know if you are trustworthy – will you repay your loan? Lenders will review all available information, such as credit reports and public records, to see if you’ve met past obligations or have a history of legal problems.
• Conditions – These are economic and other outside circumstances that may affect your ability to repay, like your business industry, the local market and competition to see how your business may fare.   
• Capital – Do you have some of your own assets invested or a financial base to help you weather changes in the marketplace? Trying to start or sustain a business without any owner investment is considered very risky – what’s to keep you from walking away in hard times? Most lenders want to see some financial investment from the business owner.
While you want to score as high as possible on each of the five C’s, all loans are different and not every borrower will have an A+ rating on each category. Having high scores on some factors may compensate for less-than-perfect scores on others. The key is to be open and honest with your lender.
If you’re interested in starting a small business, check out local resources available to help, such as:
• The SBA Score Program – counseling program for aspiring entrepreneurs and business owners.
• Oklahoma Small Business Development Center – helps you think, start, grow and reinvent your small business.
• Vo-Tech System – provides business and industry training services.
• Junior Colleges or Universities – Get a better understanding and foundation for business.
Opinions expressed above are the personal opinions of David Goodwin and meant for generic illustration purposes only. RCB Bank is an Equal Housing Lender. RCB Bank NMLS #798151. David Goodwin NMLS#449727. Member FDIC.


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