The 5 “C’s” of Credit

When a business approaches a lending institution about debt financing, the lender conducts an evaluation of the borrower using a method known as the 5 C's of Credit. Here is a quick explanation of each measurement.

  • Character – Is the business considered trustworthy and do they have a good record of meeting their financial obligations?
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Owner vs. Employee Mentality

The owner, or the person that invests in a new business, gets paid out of the business' profits. An employee gets a guaranteed wage paid by the owner/investor. Therefore, the employee cares about getting a paycheck, while the owner cares about the ongoing success of the business and profits. We own a few income [...]

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The Corporate Management Structure

Corporations are legal entities that have stockholders and require a rather specific corporate structure to be compliant. The structure can be thought of as a pyramid. At the base of the pyramid are the stockholders, who elect and remove directors and approve fundamental changes to the corporation. Next are [...]

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Influencing Styles

We all have a predominant influencing style when working with others. However, we often need to change our influencing style based on various conditions. At their core there are styles that have a kind of push energy and others that employ more of a pull type energy. Influencing styles with a push energy involve Persuading or Asserting your position, [...]

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Three Dimensions of Customer Attractiveness

Not all customers have the same contribution to your business success. All customers should be rated based on their attractiveness using three fundamental measurements. 1. Importance – some customers have high margins but provide overall low revenue, while some customers may have low margins but contribute lots in terms of revenue. In the end they may have the same contribution [...]

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Could Taxes Reach The Tipping Point?

Politics is essentially the practice of influencing others. In an environment of free will the act of influencing either appeals to a constituent's “self interest” or contributes to their “self esteem”. Appealing to self interest is self serving, while appealing to self esteem make constituents feel morally superior. When it comes to paying taxes, the poor will vote for [...]

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Know What The Customer is Buying

Regardless of whether you are selling a product or selling your business it is important to make sure you understand what the customer is buying. An early mentor of mine by the name of Ron Muns had a business that developed software to track a company's assets. After sales began to ramp up [...]

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Don’t Discount Your Position

Small businesses generally discount their negotiation position when dealing with a larger company. Basic economics would dictate that if you provide more value in an exchange you should be compensated. Consider the hotdog vendor in front of Home Depot. I postulate that Home Depot derives more value in that exchange than does the hotdog vendor. When I employed day-labor [...]

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