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In evaluating loan applications, the three Cs of credit are taken into account – character, capacity, and collateral.
Character is actually a check on your financial status and personal credit history, including your previous loan payment record. The theory is that people are creatures of habit – if you have repaid a loan on time before, you will repay this one as well. Conversely, if you have defaulted on a previous loan, the danger is that you’ll tend to default again.
Also considered is experience in the type of business you are trying to finance, including level of responsibility, education, and business management training. Lenders are particularly concerned that potential borrowers have a solid understanding of financial record keeping, business credit, the importance of collecting accounts receivable, inventory control and turnover, and marketing their product or service.
If your prior business experience is not relevant to your current venture (for example, if your career has been in the corporate world, and you want to start a restaurant), banks will be leery about your ability to run the new endeavor successfully and thus repay the loan.
Prudent bankers have always looked first to the cash flow of the business as the way the loan will be repaid, which underlines the importance of preparing a cash flow statement with future cash flow projections before presenting your loan request. Doing so indicates to the lender that you are knowledgeable about the cash coming into your business, and are therefore better able to avoid a cash shortage that would jeopardize making monthly payments.
While cash flow is the primary source of loan repayment, lenders will want a backup or secondary source as an exit or last resort, should your business not prove profitable. Collateral – defined as “anything of value used as security for repayment of a debt or performance of a contract” – can be real estate, stocks and bonds, savings account passbooks, equipment, accounts receivable, or the cash value of life insurance policies.
The UFI Micro Loan Program can help you get the financial assistance that you need to be a competitive business.
Only UFI graduates may apply for Micro Loan Funds. The loan application package requires a comprehensive business plan including cash flow projections, market research, business organization plans and more.
Requirements and Micro Loan Information
For more information on Micro Loans call UFI at (304) 697-3007.
All SBA eligible businesses and/or borrowers
KISRA is the only organization to become a certified statewide lender under the U.S. Small Business Administration’s micro loan program.
The program provides financial assistance to women, low-income individuals, minority entrepreneurs and other small businesses that need loans ranging from $5,000 to $50,000. The program is open to entrepreneurs who generally do not qualify for conventional loans or other, larger Small Business Administration-guaranteed loans. For more information contact Patricia Scott at or 304-768-8924 x203
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