Whenever you go out to look for a good creditor like Northcash, you might want to, first of all, have a look at these 5 Cs plan to guide you through the whole process. They are Collateral, Cash Flow, Capital, Conditions, and Character. Below, are further explanations for these 5 Cs and the reasons why they can help you a great deal in your creditor endeavors.
- Cash Flow Importance
When looking into the 5 Cs of banking, Cash Flow is the first thing that comes to mind. You need to convince the banker that your business is generating enough cash flow that will enable you to repay the loan that you are applying for. Here, your company’s financial historical records and cash flow records will be analyzed and used to determine whether you qualify to get a loan or not.
- Collateral importance
The bank will always look at how the company’s collateral will always exceed the loan amount that they offer you. The bank takes collateral to be the secondary repayment of the loan if in any case, you fail to repay the loan yourself. The bank is also looking into how it can secure the money that it is loaning over to you and so collateral is a vital process to look into here.
- The capital to banks importance
The bank will be looking into the owner of the company to always have enough equity in the company. There are two reasons why the bank looks into capital.
- One, the bank is looking at the equity of the company and if it can provide a cushion that can withstand any blip in the company’s capacity to generate cash flow.
- Two, the bank is looking into the owner of the company to be sufficiently invested. The reason for this is so that the owner of the company will always do whatever is necessary to keep the company afloat especially when things are about to go haywire.
- Conditions importance
This is the overall environment of the company, how the company is operating and its industry. The bank will want to know this information to help it determine any key risks that may be facing the company and whether they are sufficiently mitigated. The reason for this is for the bank to be certain of the future viability of your company. There is no chance the bank will offer you a loan if it feels that some unforeseen risks may threaten the viability of your company.
- Character importance
With character, the banker can determine whether the banker and the company owner are honorable enough to pay back the loan in due time without having to be followed up. Character determines whether you are honorable enough to meet the obligations set by the bank about the loan that you are applying for. There is no chance of the banker approving your loan if he or she finds that you score very poorly in regards to loan repayment character. The banker will review your character using your credit scores, look into your current and even former banks and your character with them as well.