The 5 C’s Every Commercial Lender Looks At

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The 5 C’s Every Commercial Lender Looks At

4page_img3-bigA commercial lender must decide which applications to approve and which to decline without personally getting to know the borrower. To make smart choices the lender will look at the 5 C’s to make their decision.

There are five basic lending criteria that every commercial lender will evaluate when reviewing a commercial loan application. Having a good understanding of the criteria and knowing how to best present your information can be a huge help in getting approved for a commercial loan. The first and maybe most critical is your capacity to repay the loan. The lender needs to be sure that you have a strong plan in place to repay the money you are borrowing. Your business plan is a good tool to demonstrate how you have that plan in place. In the end, if you can’t afford to repay the loan then even meeting all of the other requirements won’t get you a loan.

Capital is also important to your commercial lender. This is the value of the net worth of your company and also of you, the owner. In many cases the decision is based on the personal financial history of the owner as the business does not have enough credit history established. This leads to the third c, collateral. The commercial lender needs to know that you have the ability to guarantee repayment of the loan. The collateral might be the property that you are purchasing, the value of your inventory or of your equipment. But whatever you are offering as collateral, it needs to have a value in excess of the amount of the loan that you are requesting. This assures the lender that they can recover their investment even if you default on your loan.

Credit history is also an important factor. It gives the lender insight into how you have managed your finances and debt in the past. This document saves the lender the time of contacting all of the previous lenders that you have worked with or all of the vendors who have extended credit to your company. It is an efficient way for lenders to see your track record where finances are considered.

Character Always Matters

Character is a quality that is important for several reasons. First, it is an indication of how you will react in a difficult situation such as if you are having financial issues. A person of character will still find a way to pay their bills. It also speaks to the way that you do business and how successful you could be in the business world. A person with poor character will not last in the business world. Customers will not work with an unethical business.

Understand The Impact of the Five C’s

When you are preparing your loan application packet be sure to address all of the 5 C’s. This will provide the lender with all of the information that they need to know that you are a trustworthy person and that your business can afford the loan that you are requesting.


Dennis Dahlberg
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177 NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701

About the Author:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

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