There are two sides to a coin; likewise, there are two perspectives on entrepreneurship. One is from the point of view of the business or the entrepreneur and clients, and the other is the lender or investor’s point of view. The 5C’s of entrepreneurship focuses on the desirable characteristics of a business from that perspective.
A lender plays a crucial role in the journey of an entrepreneur, and hence having the five desirable characters should not be undermined either. Let’s have a look at these famed 5 Cs of entrepreneurship that every lender looks for before handing over the mullah!
Character:
Here it is not only the character of the entrepreneur but also a business as a whole that is under consideration when a lender looks at characteristics before lending the money. How strong is the character of the entrepreneur, how credible and reliable the business plan is, how capable is the entrepreneur to see through successful sustenance of the business are important decision-makers?
Lenders might even consider the character of the rest of the team, as eventually, it’s the employees who will take the business from point A to point B. Clean credit reports and a clear criminal background are some of the other points that the entrepreneur must keep in mind before pitching to a lender.
Cash Flow:
A strong cash-flow chart is not only important from a lender’s point of view but also a sign of a good, healthy business. Having detailed and constantly updated financial statements is essential to keep the cash flow in check. An entrepreneur should make sure of maintaining a comfortable cushion between the incoming and outgoing. It is something that a lender will always closely monitor to gauge an entrepreneur’s ability to return the funds that they borrow.
Capital:
It includes the entire financial plan backing the business; the cash flow, the budget, an entrepreneur’s investment, liquid assets, etc. Also essential is an explanation of how much the entrepreneur needs to borrow and a practical plan to give evidence of being able to repay the loan.
Collateral:
It guarantees that an entrepreneur has to give the lender if he cannot repay the loan. As an entrepreneur, one has to secure collateral – assets that he has to let go of in a situation of the business failing and unable to return the money borrowed. An entrepreneur must have enough business assets in the absence of which a lender can go for personal assets, in which case the stakes are much higher and risky!
Conditions:
Last but not least is conditions; there are various conditions that a lender would be interested in knowing about, with concern to the entrepreneur as well as the business before agreeing to lend them money. Some of these conditions include how realistic the business plans are and if they are in line with the current and future market trends to beat the competition.
From a lender’s point of view, the underlying factor for every character is an entrepreneur’s ability to repay the loan. Every aspect leading up to it will always be under scrutiny!
