The 6 criteria used to assess requests for financing

Requests for financing are usually assessed according to the following 6 criteria:

1. Calibre of the business principals

Principals are the primary source of fuel for business projects. Their vision, energy and the effort they are willing to make are the factors that make or break a project.

2. Business environment risks

Lenders make sure that your industry is not perceived to be subject to inordinate risk. The upcoming lifting of a tariff barrier, a procedure that creates pollution or the fact that your business is situated within a fragile sector of the economy may cause a lender to be overly cautious. The company should also be adequately covered by insurance that is tailored to the nature of its activities.

3. Project credibility

If lenders or investors decide to put money in your project, it’s because they hope the investment will pay off. They’ll make sure your previsions are based on verifiable facts and are realistic.

4. Company’s ability to pay and financial structure

You’ll have to prove to lenders that the company is able to meet all of its financial obligations. The company’s financial structure should therefore show a healthy balance between loans and assets.

5. Principals’ financial history

In lenders’ eyes, the future can largely be predicted by the past. It is more than likely that they will run a credit check on the business principals to see if principals effectively met past financial obligations. A bankruptcy or unpaid debt may negatively impact a principal’s credibility.

6. Security

Debt financing is usually secured against company assets, which should be sufficient to allow lenders to cover their risk.

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