Entrepreneurship Delivered in: The Islamia University Bahawalpur Presented By: Tasawar Javed

What Lenders & Investors Look for in a Business Plan 5 C’s of Credit Banks return; what if new business fails. Once a business in operational & has established a financial track record, however, banks become a regular source of financing. So you must be aware of the criteria lenders and investors use evaluating the creditworthiness; they refer it as 5 Cs of credit  Capital  Capacity  Collateral  Character  And Condition

Capital  a small business must have a stable capital base before any lender is willing to grant a loan. Most banks refuse to make loans that are capital investments because the potential for return on the investment is limited strictly to the interest on the loan, potential loss would be probably exceed the reward  Bank expect a small company to have an equity base of investment by the owner(S) that will help to support the venture during times of financial strain. Lenders and investors see capital as a risk sharing strategy with entrepreneurs What Lenders & Investors Look for in a Business Plan

Capacity  Cash flow; lenders and investors must be convinced of the firm’s ability to meet its regular financial obligation and to repay loans, and that takes cash. Small business fails due to lack of cash than from lack of profit. It is possible that a company to be showing a profit and still have no cash- that is technically bankrupt  Lenders except small business to pass the test of liquidity, especially for short term loans. Potential lenders and investors examine closely a small company’s cash flow position to decide whether it has the capacity necessary to survive until it can sustain itself What Lenders & Investors Look for in a Business Plan

Collateral  It includes any assets an entrepreneur pledges to a lender as security for repayment of a loan. If the company defaults on the loan, the lender has the right to sell the collateral and use the proceeds to satisfy the loan. Banks normally don’t approve the loans unless they are bank by collateral.  A sound business plan can improve a banker’s attitude toward a venture What Lenders & Investors Look for in a Business Plan

Character  Before extending a loan to or making an investment in a small business, lenders and investors must be satisfied with an entrepreneur’s character. The evaluation of character frequently is based on intangible factors such as honesty, integrity, competence, polish, determination, intelligence and ability. Although the qualities judge are abstract, this evaluation plays a critical role in the decision to put money into a business or not  Lenders and investors know that most small businesses fail because of incompetent management, and they try to avoid extending loans to high risk entrepreneurs What Lenders & Investors Look for in a Business Plan

Conditions  The conditions surrounding a funding request also affect an entrepreneur’s chances of receiving financing. Lenders & investors consider factors relating to business operations such as potential growth in the market, competition, location, SWOT  The higher a small business scores on these five Cs, the greater its chance will be of receiving a loan. What Lenders & Investors Look for in a Business Plan

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