Whether it’s for your commercial premises or your setup costs, you’ll want to secure a decent commercial loan to launch your business. There are five considerations most lenders use when reviewing loan applications. Also known as the 5 C’s of credit, these are Character, Collateral, Capacity, Capital and Condition. We’ll be explaining each of these five criteria in a series of articles. In our first article, we’ll cover the definition of Character.
What is Character when it comes to a loan?
Character, in simple terms, is the reputation of the borrower; defined by their trustworthiness and willingness to repay their loan. Characters assessed through your credit history and your proven ability to pay bills or debts. This assessment of your Character can extend from 7-10 years into your past.
How is Character assessed? Characters assessed through both your personal and business reputation. For example, your ability or inability to repay your car loan may affect your eligibility for a business loan in future – and vice versa.
Let’s get into more detail about how Character is assessed in a loan application
There are many ways for lenders to get a sense of your Character such as; reviewing your credit history, your loan repayment history, your savings or your job stability (i.e. years in a profession, time with the same company). If it helps you to consider these as questions, they might be asking:
- Does this person repay their debts on time?
- Does this person save money well?
- Does this person have a regular income or stable employment?
- How long has this person been in this profession?
- Does this person have a history of financial success or problems?
For a commercial loan, your experience in the industry and current business license or credentials are also relevant.
Providing evidence of a strong character
If you’re applying for a loan with your primary financial institution, they are likely to have access to records that prove your Character. If not, you may need to provide copies of compliance-related payments (e.g. GST, tax returns), copies of bank statements showing investments and savings, copies of current bills with proof of timely payments.
Our final suggestion to act on before seeking a business loan is as follows:
Get all your paperwork together before going to your bank for a loan application.
Identify where your business will operate from including a 5-year financial forecast.
Secure your ideal business premises.
Brand new commercial opportunities in Woodvale
If you are looking a health services specialist or a professional services business and seek to operate a business in the northern corridor of Perth – new opportunities exist for sale and lease at the proposed development in Woodvale.
Woodvale Medical and Professional Centre will be a hub of activity for both professional and health services. Surrounded by ample retail and cafés, it’s an accessible location that’s ideal for business owners or commercial investors. Learn more about the project on our homepage and use the contact form to submit sales and leasing enquiries.