What Do Lenders Look For — The 5 C’s Of Credit

What Do Lenders Look For — The 5 C’s Of Credit

What Do Lenders Look For — The 5 C’s Of Credit

As a small business in the greater New York area, it can be hard to get the ball rolling. There might be countless other business like yours. You might not have the budget for marketing after you spend all of your working capital on a business front location. You might even simply need seed money so that you can begin the business shaping process.

When people start looking for a source of working capital for small businesses or other similar business ventures, their first search query usually sends them in the direction of a bank. But is that the best move for a new business owner? Well, that is a problem for a different day. In fact, check out our blog post titled “Business Loans — Private Lending vs. Public Lending”.

In today’s blog post we will be discussing the 5 C’s of credit — 5 things that lenders look for when you apply for a working capital loan. Continue reading to learn more.

The 5 C’s of Credit

When you decide to embark on a business venture it is important to have the financial backing necessary to grow at a sustainable rate. That means you need financial assistance like import financing, commercial lending, trade financing, accounts receivable, credit protection, working capital, factoring, or any other service that can protect and grow your business. But both private lenders and public lenders have the ability to deny or avoid financing your project or business.

Because of this, you have to prove to the lender that you have the credit, capacity, collateral, conditions, and capital to show the lender that you and your business venture are a sound investment. Continue reading below as we elaborate on the 5 C’s of credit.


Before a lender, such as ourselves, decides that they are willing to give you the capital loan that you have requested they will assess your character. Essentially, the lender is trying to assess your character and your financial situation in such a way that they can determine if you are trustworthy enough that they can feel comfortable going into business with you.

As a new business owner or someone looking for seed money for their next project, it is important to understand that the evaluation of your trust and fiscal situation is not negative in nature. It is not because the lender wants to make sure that they can get all of their money back as much as it is evaluating whether you have the means to end the working relationship as the borrower someday without digging yourself a hole.


Similar in nature to character, the capacity of a prospective borrower to repay the investment in and to make sure that the borrower will have the ability to successfully pay back the lender and succeed in their business venture.

The most common way this is done is for the lender to determine if the prospective borrower will have the ability to repay the loan is to compare the borrower’s income with their recurring debts. Doing so provides the lender with a debt-to-income (DTI) ratio that illustrates how reliable the prospective borrower will be in making payments on their business loan or capital loan.



When a borrower applies for a capital business loan they are doing so to gain working capital that they can use for the growth of their business or the success of their business venture. When a lender is assessing if they are willing to provide someone with a loan they also take a look at the capital that already exists, and how much the prospective borrower will be putting towards the investment or venture.

The more money that a borrower is able to invest in their venture, the chance that they will default decreases — a factor that is obviously important to the lender. Additionally, the size of the sum that the borrower is willing to invest can affect the rates and the terms of the small business loan or capital loan.


When a borrower wants to increase the likelihood of their business loan or capital venture loan being approved they can put up collateral — assets that can be transferred to the lender if the borrower defaults on their loan.

Collaterals for capital loans are used in the same way that car loans are used for cars and mortgages are used for homes. The same way that car loans are secured by a car and mortgages are secured by homes, a capital loan for a small business or a business venture can be secured by collateral assets.


The last of the 5 C’s is the conditions of the loan. Arguably the most important for the lender when considering whether or not to provide a borrower with a loan, the conditions of the loan refers to how the borrower intends to use the working capital, and how the interest rates and principles will be affected by said intent.

For Working Capital For Small Businesses And Business Ventures, Think The Hedaya Capital Group

At the Hedaya Capital Group, we provide small businesses and business ventures with working capital that they can use to sustainably grow their profits and reach. Providing services like factoring, credit protection, accounts receivable, and trade and import finance, our team is here to help you with all of your fiscal needs.

Contact us today to see how our old school values and new school thinking can help you to get your small business or business venture in the green.

We look forward to working with you!

Let Us Know What We Can Help You With!