Many businesses need financing to get started or purchase assets for an expansion. If you’re looking for flexible options and fast approval times, you might apply for financing with an independently owned commercial financing partner like Team Financial Group. But what happens to your application after you submit it? What affects whether a financing request gets approved or denied?
In this article, we’ll answer these questions and more by explaining the five Cs of Credit that financing partners like Team Financial Group use to evaluate your application.
Before we get started, however, it’s important to know that there are no “perfect” applications for financing in the real world. Even if you feel like your business could be stronger in one of the areas described below, it doesn’t mean you won’t be able to secure the financing you need, so don’t worry. If you have questions, just contact Team Financial Group and let us do the rest. Our mission is helping all types of businesses get the financing they need.
Financing partners use five primary factors to evaluate whether they can approve a financing request from a potential client. These factors, known as the five Cs of credit, consider information about both the borrower and the financing option for which they’re applying. For commercial financing, the financing partner will analyze the finances and history of both your company and you personally.
The five Cs of credit are:
One of the most important factors companies consider when evaluating a financing request is your credit history, which is sometimes referred to as your character. (Having a negative credit history doesn’t mean you’re a bad person, so “financial reputation” might be a better term, but “character” is easier to remember.) Your credit history is a record of your debts and payments that financing companies use to determine the risk involved in providing financing.
Your credit history provides a financing partner with information such as:
As previously mentioned, for commercial financing, the financing partner will look at both your personal credit history and your company’s credit history.
After examining your credit history and depending on the size of the request, the financing partner will look at your business’ financial capacity to make payments. To evaluate this capacity, the financing company will look at your debt service coverage (DSC) ratio.
Your DSC ratio allows the financing company to understand your company’s ability to pay your existing debt obligations with your current cash flow. The higher your DSC ratio, the stronger you appear as a borrower.
Your financing partner may also consider whether you’ve put your own capital into the proposed business investment or whether you’re relying solely on financing. However, at Team Financial Group, we gladly offer 100 percent financing for commercial equipment, so not having available capital should never prevent you from getting the financing you need.
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Collateral refers to assets or property that a lender can repossess if the borrower defaults on a loan. The idea behind collateral is that the lender can sell the repossessed property and recoup some of their losses.
Conditions is a catch-all term that refers to details about the financing option itself or even outside factors that could affect the financing or your company. Examples of relevant information might include:
These are just a few examples; many other factors can influence whether a financing partner can supply the amount of financing you require with the terms you prefer.
At Team Financial Group, we take a personal approach to every financing request. Our experts can walk you through the five Cs of credit as they apply to your unique business situation and help you understand how to secure the financing you need.
If you have any questions about our financing approval process or which financing option is right for your business, fill out our online contact form or give us a call at 616-735-2393.
The content provided here is for informational purposes only. For financial advice, please contact our commercial financing experts.
When it comes to choosing the right commercial lender for your financing needs, understanding the difference between your many options is key. If you are looking to finance equipment for your business, your primary options are depository lenders, such as banks, and independent lenders like Team Financial Group.
Continue reading to learn more about the differences between banks and independent lenders and how you can decide which is the best choice for your business.
In many cases, banks and independent lenders are not direct competitors. In fact, at Team Financial Group, we often meet clients via referral from banks. Many of our customers work with a bank to secure their working capital, such as lines of credit, and then partner with Team Financial Group for fixed-term financing to buy equipment.
As an independent lender, Team Financial Group can provide more financing options than our clients could get directly from a bank. Even in cases where our services overlap with those of banks, many clients choose Team Financial Group because our financing options are faster, simpler, and more convenient. Other clients use Team Financial Group rather than their bank because their financing needs don’t fit into the more rigid structure that regulations impose on banks.
There are a few differences between financing through an independent lender and a bank. The top differences fall into four categories of financing outlined below.
Banks have more rigid lending guidelines and often have automated underwriting processes that are designed to reduce their risks. To minimize their risks even further, banks often require putting up additional collateral besides the financed assets.
Banks often prefer to lend money for appreciable assets — assets like real estate that have the potential to gain value over time. Meaning they may be less interested in financing equipment with higher depreciation rates.
Independent lenders have more flexibility in the type of assets they are willing to finance. Team Financial Group specializes in providing financing for depreciating business assets such as IT equipment, which is frequently replaced due to technology updates.
Banks lean more towards providing large, long-term loans and typically do not have as many options available when it comes to size, payment structure, and term. One of the biggest downsides to financing with a bank is that the approval process can last days, weeks, or even months.
Independent lenders typically have portfolios that include deals of all sizes and are almost always faster when it comes to loan approval and processing. Team Financial Group can often provide same-day processing, meaning you can get the money you need for your business when you need it.
Down payments of up to 20% are fairly standard with bank financing and are another way banks try to minimize their risks.
Because of their more flexible and hands-on risk management styles, independent lenders often do not require a down-payment at all. Team Financial Group can often provide financing without a down-payment and still offer 100% financing, with the option to extend loan terms up to 7 years if needed.
Now that you understand some of the differences between banks and independent lenders, determining which type of commercial lender is right for your business comes down to three simple questions:
Consider the information in the previous section, and then ask yourself those three questions. For many businesses, working with an independent lender like Team Financial Group is going to be your best option for getting the type of loan you need, when you need it.
At Team Financial Group, our offerings are built to meet the unique needs of business owners. As an independent commercial lender, we can provide faster, more customized financing solutions — often with same-day approval. Our dedicated team works diligently with all of our clients along every step of the way to achieve the best financing option to help you grow your business.
Check out our website for more information about our financial offerings. If you have questions about which type of loan is right for your business or whether your credit is high enough for approval, fill out our online contact form or give us a call at 616-735-2393.
Want to know how we can help you move forward with your next commercial financing project? Let’s talk!
The content provided here is for informational purposes only. For financial advice, please contact our commercial financing experts.