Small Business Financing: The first of the 3 C’s of lending
The first of the 3 C’s of lending, comes into play when it comes to lending criteria. Often the funding for small businesses is a tedious, complicated and time-consuming process. Knowing the 3 C’s of lending may thereby let us know our options for seeking the type of funding. Although we couldn’t change much for certain processes, we can at the least be prepared by doing things which may help in expediting the process thereby reducing the loan processing time
The first of these three C’s are
1.Cash flow
2. Credit
3. Collateral
Traditionally, when it comes to “how a company gets funded amount” “who qualifies” “what can they qualify for” etc. what it really comes down to is this. In order for a customer to get money, in order for a company seeking funds to qualify for a loan or a credit line they’re going to need one of these three things. Either strong and consistent cash flow, or good personal credit or need to have some kind of collateral to get a business loan. That was the traditional approach if you have none of the above three that’s when a business credit comes in and saves.
The business credit is something any business can get. Business funding is a way to be able to still keep a company running or expand and earn a profit or help a company when it typically can’t through financing. When it comes to typical loans and credit lines it really all comes down to having one of these three C’s cash flow, credit, collateral.
Above we discussed the case when we have one of the Cs strong. When you have 2 C’s stronger that’s when more financing options open up. Example: We the company has 2 C’s strong, Good Credit and a health consistent cash flow that when you can get the option of term loans, lines of credit, a better longer rate lower term financing etc.
If you have the stronger tri-factor that is Cash flow, Credit, Collateral then you’re getting an SBA loan. The Goal for any borrower like is to fit companies with as many as C’s possible thereby providing with better financing options.
Being a responsible company we try to elevate them in stages. For example: If we have a Startup approaching we will try to fund them with based credit then that gets them the money to start generating cash flow, then we educate them and teach them about assets (such as account receivable, collateral) and then when they have the trifecta (3 C’s) we graduate them an SBA loan.
But what happens when you don’t have either of 3 C’s (Cash Flow, Credit, Collateral) strong. That’s when companies have the option of getting Funds through ” Revenue-based Financing”. In the revenue-based funding, is a method of raising capital for a business from investors who receive a percentage of the enterprise’s ongoing gross revenues in exchange for the money they invested.
Revenue-based financing model is especially suited when your Cash Flow, Credit or Collateral is not so strong. Moreover, the amount is disbursed between 24 hrs to 48hrs. All this without any collateral anything or the lender’s interference.