Banking on Business - Tampa Bay Business Journal:

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That's crucial to consider now that credit underwriting istighteninvg up. The days of easy moneg are over, with lenders taking sharo pencils and sharper scrutiny toloan applications. It's important to know what the bankerws arelooking for: The five C's of The five most important components of credit are drummede into bankers from their earliesf classes. Familiarity with these credit criteriaw could help a business better positioj itself to geta loan.
Typically, smallert community banks still underwrite loansunder $250,000, whereas large r banks tend to use automated The difference is that the larger banks usually just tell a customer they can't help them because the automated system rejects them, whilee smaller banks sometimes take the time to explainj to customers what's needed to get that "We try to educate the people on what will make them What community banks do is work in almost a consulting said Bill Martin, chief executivw of .
All bankers interviewed said character is the most important thinhg bankers are looking for ina "There is the fundamental thing to look for, and that is whether the borrower has the ability to repay the loan, but more importanft than that is character," said Dave a local bank consultant. "The charactedr is what it is all especially in thedown times. Who stands up and who walksa away?" Nearly all of what becomre bad loans were made durin g good or boom Alford said. "The real charactert is shown in thetougyh times." "It all starts with If the character doesn't pass, nothing else reallyh matters," said Dave Kaiser, president of in Granite Bay.
If a person has a good credit rating, that's enoughb to get a consumer loan at a competitiveinterestg rate. But the consumer loan doesn't look at thingd like outstanding lawsuits, criminal record or standing inthe community. Businessw loans look at all of that and They look for integrityand "Character isn't in the numbers. It is the Martin said. "Character has to be a If that isn't there, you don't have anything," said Mike regional presidentfor . "Withour character, you can have someonse who has all theother C's but decides not to pay you But character alone won't get anyone a loan.
The businesxs has to have earning potential, collateral and not too much After character, the opinions diverge. Some banka like to see collateral, which is what a borrowe r is willing to put on the line in case theloan can'gt be repaid. Collateral is usually land or a but it could be a planeor equipment. Other bankers prefer to see a stronbg capacity to repaythe loan, the idea being that strong cash flow can take care of a lot of said Greg Patton, president of . "Most people's experiencde with a loan is ahome loan, and that has nothinbg to do with a businessx loan," he said.
"Borrowing for a house is a wildlyu different thing than borrowing for a People come in andsay 'I'm qualified for a $700,0009 mortgage, so I'm good for a $700,00 business loan.' Well, no. You are not," Pattonj said. "I'll give you that loan if you give me a firsty deed of trust on a highly marketablw pieceof collateral. There is a big In a business loan, we are taking all the Bankers are putting federallt insured funds at stake every time they fund a They have to make sure the money will be Patton said.
"At a your profits go to your but your losses come out of your You cannotlose capital," said Bob partner in Greeley, , a distress management companuy in Sacramento. He used to work as a banker, and always stressed to borrowers that the bank neederd to know how it was goingt to get itsmoney back.