Business Tip #13 - Character

Keeping in line with the five "c's" of credit. This week's "c" is character.

How does a bank measure "character"? Especially, in the context of a business loan.

First, nearly all small businesses require the personal guarantee of the owner(s). Why? Because a business owner might be the best indicator of what's going on inside the business. As I used to tell customers "If you're not willing to stand behind your business, why should I?"

Other things, that banks look at to assess character are personal credit bureaus, Dunn and Bradstreet reports, and your personal financial statement.

When I was a banker, I always thought it was important to evaluate the lifestyle of the owner of the business. In my mind, if an owner is someone who takes all the earnings of the company to fund retirement plans and savings, it says something entirely different than an owner that needs cash to fund trips to Vegas, cars and jewelry.