2. Capacity

The banks will look at your business’s balance sheet and cash flow statement to see how much you can afford to borrow. They will also ask for your personal financial statement to see what kind of debt you can handle. Most small business loans tend to be based on the individual’s ability to repay the loan, not on the cash flow of the business.

They may ask about your spouse’s employment as well. Loan officers tend to consider loan applications more favorably if you are introducing a new product or service with an obvious demand, there is little competition, your market is composed of small independent businesses and a lower rate of failure in your type of business.

3. Capital

In order to make sure that you will be able to pay what you owe a creditor, you need to have a good net worth. This is computed by calculating the difference of all of your assets and your liabilities.

These might also consider sizeable properties, as they can be able to serve as payment for your debts. In addition to the debts or the amount you owe another party will constitute your liabilities.

When you will subtract your liabilities from your assets, the remaining value will represent the other C in credit, the capital.