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Paul Halek

By: Paul Halek

Tuolumne County SCORE’s monthly staff meetings are on the 2nd Monday at the Tuolumne County Chamber of Commerce office at 222 S. Shepherd Street. Past, current and potential business owners are welcome to join our round-table discussion listening to your questions and offering advice. Just give us an advanced notice and we’ll reserve time for you!

MONEY! Where do small businesses get funds? According to a PartnerUp survey of 480 early-stage startups, funding sources, ranked in descending order, are: Savings, Credit Card, 401K, Home Equity Loans, Family & Friends and Professional Investors.

BANKS! Knowing what a lender wants to know about you and your planned business or existing company is crucial. There’s no big mystery – lenders want assurance that potential business borrowers are a safe and smart place to “invest” their loan dollars.

Do some research and you’re bound to come across sites featuring “The Five C’s”. Those “C’s” may be Character, Capacity, Capital, Conditions and Collateral.

Let’s stop here for a moment.

SCORE’s monthly articles theme revolves around – the needed Business Plans and Finance Plans. Imagine you’re the Loan Officer reading the Business and Finance Plan of a potential loan customer sitting in front of you. If their plans have solid structure, are well thought out and give you a feeling they know their industry and have flexibility in their plans, you’d want to continue. If they don’t have a Business Plan or their plan is weak, you’ll need more persuading to continue.

OK, back to those “C’s”.

CHARACTER - sometimes called “credit-worthiness,” refers to your debt repayment track record and general credibility, experience, and expertise. You may have an excellent payment record – or – have a few bruises but have done everything afterwards to stay current with your obligations.

Lenders want hard data to form an opinion on your ability to pay back the loan. One piece of character data scrutinized heavily by lenders but often overlooked by borrowers — Personal Credit Scores.

Do you know your Credit Score and can you track it over time to show consistency? Should you carry a monthly balance? Is it good to pay the entire balance each month? Want to know about SBA loans?

The answers to those, and other, credit card questions can be heard at the SCORE Tuesday, October 9, 2018 “Finance” Workshop being held at the Tuolumne County Library from 5:30pm. Our co-sponsor is Wells Fargo and local managers will present and be there.

CAPACITY - your ability to repay a loan. By assessing your Debt-to-Income ratio and other factors, lenders make a judgment as to whether or not you have the “Capacity” to meet your loan obligations. If you’re unable to demonstrate that ability your lender will be less likely to offer financing – you need to show them you’re willing to have some ‘Skin In The Game’.

Get your numbers in order to demonstrate you have the means to successfully repay your loan. A SCORE Finance Plan template will help you construct a dollar trail from pre-start to Opening Day.

CAPITAL - the amount of money or personal funds an owner invests into the success of the company. Lenders want to know, prior to asking for funds, that you’re willing to share financial risk by contributing your own assets to establish the business. A large contribution by the borrower decreases the chance of default and indicates your level of seriousness, which can make lenders more comfortable in extending credit.

Work with a professional to determine how much of your own capital is wise to invest to keep your lending request in line.

CONDITIONS - refers to the purpose for the loan and considers how the business could be affected by outside events, like economic and industry factors. You’re that loan officer again and what you’ve read and what you hear tell you the applicant has insight into their industry, perhaps some experience and clearly understands the strengths and pitfalls that could come their way. And, they are prepared to weather unfavorable market fluctuations

Your market must be able to support your business’ plans. There must be enough demand to meet your sales projections and the economy must be strong enough to sustain it. The SCORE Finance Plan template helps you with Sales and Expense projections

COLLATERAL – forms of security a borrower provides agreeing it will be the repayment source in case they cannot repay. Lenders feel secure when hard assets secure their investments in the event of default.

The collateral’s value isn’t based on market value; instead, it’s discounted to take into account the value that would be lost if those assets had to be liquidated.

Different lenders may weigh each “C” differently, based on their lending policies and preferences. However, when you understand the importance each “C” plays in a lender’s decision to extend credit, you can better prepare your lending request and improve the likelihood your loan application will be approved.

Remember this date – Tuesday, October 9, 2018 for the SCORE/Wells Fargo Finance Workshop. Register online at our website ( and click on EVENTS.

Tuolumne County SCORE is a Chapter of the National organization which is a part of the SBA

Contact Mr. Halek


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