Small Business Development Center

Character Counts


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Character Counts


Authored by: Sherri Daymon

When applying for a commercial loan, banks will judge you, and your business, on the “Five C’s of Credit:” Character, Capacity, Capital, Collateral, and Conditions.

Today, let’s focus on the personal side and your Character.

“Character” is really just another way of saying “credit history” or “credit score.” If your score is lower than 550 (on a scale between 300-850), lenders may not be willing to touch you with a ten foot pole. If lenders do agree to engage with you, it may be with a sword – gouging you with double, or even triple, digit interest rates. Something upwards of 20% - 250% APR. Not kidding.

So, before submitting a loan package to a lender, research your credit history; have a solid idea of your credit score range (likely to fluctuate within 20 points between the three credit bureaus); and ask about any credit score requirements the lender has. Also, from the get-go, please be completely candid with your SBDC business advisor about your credit history so s/he can best assist you in developing realistic financial projections and identifying possible funding sources.

Earlier this year, I spent exhaustive time and energy trying to assist a client in obtaining a SBA loan. The client admitted to having some “minor credit problems in the past” and “not a super credit score” but also assured me that she had paid off three prior business loans and had a 10+ year business banking relationship so she thought financing continued expansion “shouldn’t be too difficult.” I worked with her and helped her build detailed three year financial projections based on her growth model.

When financing got stalled, I contacted the local loan officer and even reached out to a personal contact within the Small Business Administration to try and move things along for my client. When the client was finally turned down for traditional commercial financing, the “character” issue was cited as the main reason for the denial of credit.

A new hunt began with alternative lenders as an option of last resort. As we updated the financial projections with dramatically higher interest rates and much shorter terms it became clear the client’s expansion plans were no longer financially feasible. Yep – a huge disappointment for everyone involved.

Moral of this story…

Before seeking financing of any kind, understand what your credit scores are and what your credit reports are showing. Here’s information from the Federal Trade Commission on obtaining your free credit report:

If there are errors on your credit report below are some steps from FICO (the company that uses your information from the three major credit reporting agencies to generate your credit score) to get the errors corrected:

Also from FICO, here is an article with steps to building or improving your credit score: Warning: building (or repairing) credit takes time. Regrettably, there aren’t any “quick fixes.”

While this article has focused on the importance of a strong personal credit history, did you know your business similarly has a credit rating?

Recently, the SBDC hosted a free webinar for our clients on “How Business Credit Can Help Your Business Grow.” In case you missed that, check out this article which was authored by webinar presenter and NAV Education Director, Gerri Detweiler:

In summary, the SBDC cannot stress enough the importance of having, monitoring, and maintaining a strong personal and business credit history for the most favorable rates and terms to continually grow your business.

Now, are you curious about the other 4 C’s of commercial lending (Capacity, Capital, Collateral, and Conditions)? If so, shoot us an email at and let us know you’re reading this blog!