When assessing risk, many bank lenders look at five factors. Knowing and checking them against your operation can help you approach a lender.
- Character. Past performance and management are important.
- Capacity. Involves evaluating working capital or equity available.
- Capital. The debt structure and amount of equity in the operation.
- Cash flow. The variability and margin of cash flow available, compared to debt.
- Collateral. Compare the amount of the loan to the amount of the collateral.