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Many Americans long to see where their talents as inventors or craftsmen or cooks can take them.
But businesses often struggle in their early years, and this makes some lenders wary of financing enterprises that don’t have an established track record.
After repeated rejections from potential funders, many entrepreneurs simply give up.
Organizations like Accion are one option for the aspiring entrepreneur who can’t secure a loan through a more traditional financial institution, such as a bank or credit union.
But getting a loan requires some groundwork, no matter where she looks.
The Five Cs
Traditional lenders evaluate loan requests on the basis of the client’s character, capital, collateral, capacity and conditions – the 5 C’s of credit.
The lender measures character by observing the client’s punctuality, organization and understanding of the size and purpose of the loan. They listen to what references say and what his credit history demonstrates about his commitment to pay off debts. They review the business plan to see how well it reflects the client’s experience, strategy and commitment.
Existing capital is a plus for an aspiring entrepreneur and a way for the lender to assess the borrower’s personal investment in the business.
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