Consider These C’s Of Credit To Qualify For A Working Capital Loan - PowerPoint PPT Presentation

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Consider These C’s Of Credit To Qualify For A Working Capital Loan

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A working capital loan is availed when a business owner faces a shortage of funds. Working capital is the most basic requirement for the efficient operations of a business. Ideally, the funds for working capital are generated from the business. – PowerPoint PPT presentation

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Title: Consider These C’s Of Credit To Qualify For A Working Capital Loan


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Consider These Cs Of Credit To Qualify For A
Working Capital Loan
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A working capital loan is availed when a business
owner faces a shortage of funds. Working capital
is the most basic requirement for the efficient
operations of a business. Ideally, the funds for
working capital are generated from the business.
But sometimes insufficient revenue is generated
when compared to the need. This situation leads
to the businessman to avail a business loan.
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The funding for the business can be availed from
various sources, such as business loans, funding
from investors, or equity funding. That said, if
a loan for business is availed, the lenders
follow a protocol to evaluate the loan
application. Some loan lenders in India follow
the protocol of 5 Cs of credit to evaluate the
creditworthiness of the borrower. So, if a
business owner can satisfy the lender with these
5Cs, the chances of getting the loan application
approved increases.
Lets take a look at the 5Cs of credit to get the
working capital loan application approved.
Repayment Capacity
Repayment of the loan amount is undoubtedly the
most important concern of every lender. The first
C of credit is the repayment capacity of the
business. For this, the lender checks the
borrowers debt-to-income ratio (DTI). It is
calculated by adding all the outstanding loans
and finding the total monthly income.
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Character Previous Payment History
The other C of credit is the character of the
business. This term denotes the previous loan
payment history of the business. Also, the type
of business or say the industry it is operating
in. The lender determines the character by
checking the CIBIL score of the business owner.
The credit history reveals the past credit
behavior of the borrower. If the business person
has an outstanding loan and is irregular in
paying for it, this can be traced in the credit
history.
Collateral
If the business owner wants to avail a secured
loan, collateral is an obvious requirement. The
lender requires an asset as security to back the
loan amount. Many business owners are not able to
provide an asset to hypothecate. So, the best
option for them turns an unsecured business loan.
When availing an unsecured working capital loan,
there is no need to provide any security. Thus,
small business owners as well get access to a
business loan in India.
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Conditions
The last C of credit is the current condition of
the countrys economy. It includes the RBI
lending protocols, industry trends, etc. Some
conditions are beyond the control of the
borrower. But the lender still considers the
condition to ascertain if the business owner
would be able to face these conditions.
All the above mentioned 5 Cs impact the approval
or disapproval of the loan application. So, while
applying for a working capital loan, you too can
look at the factors and accordingly apply for a
business loan online. Want to read the latest
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