Make Sure Your Business Looks Good On Paper, As Well As In Person

Online, February 21, 2011 (Newswire.com) - A business' credit-worthiness is determined by what is known as the Four C's of Credit: character, capacity, capital and conditions. All of these can be found in any company's credit report.

But what are the Four C's? What makes them so critical?

• Character includes factors such as size, location, number of years in business, business structure, number of employees, history of principals, appetite for sharing information, media coverage, liens, judgments or pending lawsuits, stock performance, and comments from references.

• Capacity assesses the ability of a business to pay its bills; in other words, its cash flow. It also includes the structure of the company's debt, whether secured or unsecured business loans or personal loans, and the existence of any unused lines of credit.

• Capital is assessed as whether a company has the financial resources to repay its creditors. This portion of the credit report is the one most closely viewed by credit analysts.

• Conditions consider the external factors surrounding the business under consideration, including influences such as market fluctuations, industry growth rate, political or legislative factors and currency rates.

These factors are also considered by other service providers, like insurance companies, to set premiums.

More than ever, companies are using automated decision-making methods, which means they input scores and ratings that summarize the Four C's into a financial model to determine the risk of doing business with that particular business. Once that determination is made, companies can then make a decision based on the findings. It may be a bit impersonal, but it expedites the process and keeps it fair and equitable.

Make your business stand out. Have your financials in tip-top order before you apply for a loan, keeping the Four C's in mind. How you look on paper can - and will - determine the success of your business.