It has long been said that in order to receive a business loan, a potential borrower must meet and posses the "Five Cs" of credit. Character, capacity, collateral, conditions and capital are all assessed when applying for a business loan and a slight default in any one of these categories can virtually obliterate one's chances of receiving business funds.



Character

Lenders look towards a borrower's character to determine their likelihood of repaying a loan. Business experience, personal credit history, references and education can all play a part in a lender's character judgment, making an applicant with little to no business experience, poor personal credit history, no references and no formal education, a less likely candidate for a small business loan.

Capacity

Capacity focuses on the business's ability to repay the loan. Therefore, lenders will review a business's cash flow in order to ensure that the business can generate enough money to support fixed monthly payments.

Collateral

Collateral is used to make sure that lenders get their money back no matter what. Equipment, property, etc. can be used as collateral. Should a borrower become unable to repay a loan, the lender can seize the assets that have been put up as collateral. When a borrower uses collateral to secure a loan, he/she usually feels more pressure to repay the loan, in order to keep the assets in his/her own hands.

Conditions

Usually, bank business loans come with conditions. The borrower has to explain what the loan will be used for and this must be approved by the lender.

Capital

Capital refers to the amount of one's own money that is invested into a company. When a lender sees that a borrower has invested his/her own money into the company, the lender feels that the borrower has confidence in the business.

Unfortunately, lots of people who need small business loans do not meet these requirements. But there is an alternative source of business financing for these potential borrowers. With a bad credit business loan, the "Five Cs" are practically thrown out the window.

Through credit card factoring, small business owners can get business financing if their business has been in operation for at least four months and processes a minimum of $2,500 per month.

When credit card factoring is put into action, a small percentage of the businesses credit card sales is put towards the repayment of the bad credit business loan. The fact that the responsibility of loan repayment is placed on the business allows lenders to place less importance on the borrower's character and capital. There are no conditions on how the money can be used, and they can receive money without collateral.

If you are looking to avoid the "Five Cs" of credit, look into a bad credit business loan, and use credit card factoring for repayment.