What are the 5 C’s of preparing for funding?

Are you seeking funding for your business? A bank or lending institution looks at certain conditions when you apply for a business loan. Your credit analysis is determined by five factors, also known as the 5 C’s. Here is what you need to know about the 5 C’s when you are preparing for funding. 

The 5 C’s of business funding 

When you apply for a business loan, your credit analysis is determined by the five C’s. The five C’s are:

  1. Character
  2. Capacity
  3. Condition
  4. Capital, and 
  5. Collateral 

Briefly, these can be described as:

1. Character

Lenders need to know that you are honest. They will look at your background to determine your integrity. The factors that lenders and banks will look at include:

  • Your education
  • Experience
  • Knowledge in your business or field
  • Your licensing 
  • Criminal record
  • Your credit report


Your capacity is your cash flow and whether you can pay back the loan. The factors affecting this include:

  • Your payment history of current loans
  • Your previous business expenses
  • The business’s cash flow and your ability to make loan payments

 3. Condition

The condition of the business refers to the likelihood the business has to fail or succeed.  Will it be a business that is set to grow or deteriorate? Here, the bank or lender will look at factors specifically related to your business, such as your target market, working capital, and expenses.

4. Capital

The lender or bank will look at your capital. If you are putting your assets into a business, you have a greater chance of a loan as it shows that you are committed to the success of your business. Your lender will ask what personal investment you plan to make in the business. 

5. Collateral

You need to have collateral as a form of secondary loan payment. The factors looked at will be the value of your business and personal assets.

Now that you know the 5 C’s, you are better prepared to apply for a loan. If you need help with growing your creditworthiness through educational programs, workshops, or funding programs, the Women’s Business Center of Northern Virginia can help. CBP recently developed Fairfax County’s microloan program that has provided over $1.6MM to businesses affected by the COVID-19 downturn. Let us help you to prepare for a business loan – check out CBP’s Business Finance Center’s classes in June at https://cbponline.org/classes-counseling/class/all-classes/ !

“Those who know, do. Those that
understand, teach.”

Community Business Partnership of Springfield, VA