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The Basics of Small Business Lending

Are you thinking about starting your own business? Or, do you own a business and are ready for your first business loan but don’t know where to start? Thanks to our AVP of Commercial Lending here at RMCU, we have broken down the basics of what you need to know about small business lending. The first step is to be familiar with the “Five C’s of Credit." Let’s break them down.



1. Character

How has your past credit been handled? Are there any negative items on your credit report (late payments, liens, judgments, collections, bankruptcy, etc.)? We look at these factors when determining whether or not to approve a loan.

2. Capacity

Does your business have cash flow and does it generate sufficient income to repay the loan?

3. Capital

How much are you putting towards the investment? The more money you put into an investment shows an increased level of commitment to the investment.  

4. Collateral

What are you offering as security for the loan? For an equipment loan, RMCU will generally secure the loan with the actual equipment.  This helps mitigate losses to the credit union if the loan were to go into default.

5. Conditions

What are you borrowing the money for? Is it to purchase an asset or cover past business losses? We also look at trends in your particular industry, the overall economy, and any laws that might affect a potential loan.

Ready to Go?

As a new small business borrower, you should also familiarize yourself with lender guidelines as each lender is different. The Small Business Administration is a great resource for all business owners. Finally, make sure you have the necessary paperwork ready for your lender. You can access RMCU’s application checklist here. For more information on business loans and services, please contact Alan DeWit or Connie Robinson today.


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