12 Keys to Successful Capital Access

It’s natural to pay close and strict attention to the numbers when looking to raise money for your business. The numbers are important, but some of these factors listed here can kill a deal, even if the numbers support the request. I call these the “Twelve C’s.” The numbers must work in every case!

These are criteria lenders use to consider the strength and credibility of borrowers to determine what projects they will fund. Every deal is unique and therefore stands on its own. The weight given and priority of order varies from lender to lender, but all of these are weighted in their decision making!

1.      Character – This speaks to the honesty, integrity, and responsibility of the project sponsor’s or loan applicants. What reputation do they have in the business community among their customers and peers? Do they do what they say, the way they say it will be done, and when it will be done? Does information from third parties support any claims they make? Do their customers recommend them to others?

2.      Capacity – Are the individuals applying for the loan have the authority to do so? Do they have a track record of success in this line of business with the type of project the funds requested will finance?

3.      Contribution – Do the sponsor’s have “skin in the game?” Are resources on hand to make a significant cash contribution to the project, 15% to 35% of the total cost? Can the show the capability to support the project and service the debt after the loan is closed?

4.      Credit – The business has an outstanding payment history with corporate creditors, suppliers, and vendors. The owners and the business do not have negative information appearing on credit reports. Their financial statements reflect sound use of leverage to manage the business.

5.      Cash-flow – The business is profitable, manages its assets well, and free flowing funds available to cover long and short-term expenses. Current profits and those generated from additional assets acquired with the loan funds requested are sufficient to service the new debt the loan adds. Business revenues are trending upward for two or three years in a row.

6.      Collateral – Business and personal assets owned are substantial enough that they would cover and return the amount of the loan in the event the business becomes insolvent. Values are often determined by appraisals and other third-party valuations.

7.      Control –They have systems in place to be effective and efficient at solving problems the market is willing to pay for enthusiastically. They have solid risk management plans and policies and procedures in place to protect company assets.

8.      Capability - The business has strong leadership and management that have demonstrated a track record of success in the industry with the types of projects they are requesting funds to complete.

9.      Commitment – A drive toward excellence is often shown by longevity of ownership, continuous growth, engaged employees, great standing in the community, and innovation. They are highly recommended by customers and stakeholders in their community and industry.

10.  Compliance – The company has met all its legal obligations to operate in their industry. They often go beyond this with strong codes of ethics and guiding principles that define why they are business, who they serve, and the boundaries they will not cross.

11.  Collaboration – How well does the business work with stakeholders? Do the owners and the company have a reputation for finding ways to support businesses in their networks and communities? 

12.  Conditions – The economy, regulations, market fluctuations and other shifting conditions cause lenders to adjust their marketing goals and strategies. They want to know what the applicant does to “pivot” during these uncertainties. Businesses that have contingency plans in place and can explain the changes they make to deal with uncertainties is important in this era of COVID-19.

As you can see, there are factors that go far beyond simple underwriting considerations to determine whether making a loan to a business is a good risk and in line with their investment goals. When you adhere to these principles, your business becomes attractive to lenders. They’re always looking for high quality projects being conducted by successful, effective, and efficient individuals and teams.

Our team is always ready to assist you to put your best foot forward and connecting with the right sources of funding for you and your business. We serve borrowers and lenders through a consultative approach to provide the best matches. Every deal should create a win-win-win result!

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