In a previous article on this website, we laid out the things you need to check before approaching a bank for loan. Your character or your business credit history is a key criterion that the bank look at in deciding whether or not to give you a bank loan.
A good character is said to be one of the best attributes any individual can posses. Fortunately, this also applies to life as an entrepreneur or business owner, more so as it relates to accessing a credit facility.
In seeking a credit facility for your business, your banker considers character as everything or nothing. For your banker character is the most vital key in the lending process as a whole lot as to whether or not you get that credit approved depends on this.
How does your banker determine your character as a business? Yes! As a business. Because as an entrepreneur, know that your banker considers you and your business as one and same person, so the character of the business is determined by its Credit History. Your banker evaluates every financial information, experience in business and quality of trade reference about your business. How well you have handled previous credit facilities is key here, what your investors say about your business relationship is vital.
Each banker has its own approach to assessing a business’ character, but typically it covers analysis of the borrower’s educational background, personal or business references and again your Credit History. Understand that although these factors are vital, your banker places more score on your credit history, how well you managed your last debt repayment tells the whole story.
Know one truth, you may have a negative credit history because of factors you could not control as a business owner, that does not still mean its all done and dusted. What is important to your banker is how well you managed your business through the stormy waters. Were you open in discussing your challenges and how you intended to handle them? Were you proactive in taking actions to deal with the challenges? Were you disposed to availing them information about your business in those trying times? This is key to your banker because they are more interested in how you dealt with those challenges rather than whether you had them.
Realize also that given two businesses to make a choice from, your banker is more comfortable to go with the one that has accessed credit before in the past than the one that has a zero credit knowledge. Why? He believes there are certain things you already know about credit. And this makes it a whole lot important that you keep that history clean.
To improve your character before your banker:
- A successful prior business history. Make your banker feel comfortable by keeping that previous history clean of default
- Have a good referral. Meaning that your character does not end with your banker but with all your business contacts
- Evidence of your effort in being a huge part of the business planning process
For your banker, character is ALL or NOTHING in getting that credit facility approved. So every little detail should matter to you as a business owner.