Siobhan Says: The 5 Cs of Credit (Lender Love Language)

Dear Frustrated,

You are asking for something close to a miracle because you’re not translating your success into lender-speak yet! A 660 score with some older missed payments isn’t a “no”—it means “tell me more.” 

Lenders don’t fund businesses; they fund people they trust. That means you need to build a relationship based on trust with the lender. The most effective way to build that trust is through the 5 C’s of Credit. Think of these as the five gut-check questions you’d ask before lending your own hard-earned cash to the person living next door: 

• Character is your reputation for reliability and whether you have a track record of doing what you say you’ll do with other people’s money. 

• Capacity is the mathematical proof that your business makes enough profit to cover a new loan payment without breaking a sweat. 

• Capital is the amount of your own cash and “skin in the game” you’ve already invested to show you won’t walk away when things get tough. 

• Collateral is the safety net of physical assets—like equipment or property—that the lender can claim if you aren’t able to pay them back. 

• Conditions are the “Why Now?” story that explains how the current market and your specific business goals make this the perfect time to borrow. 

Here’s what you need to do next:

1. Character: Show you can be trusted to pay the lender back.
Pull your free credit report at AnnualCreditReport.com. If you see late pays, don’t dispute them – that’s a red flag. Instead, create a new Word doc, type “Letter of Explanation” (LOE) at the top, and then explain what happened. (These will go to the lender.) On the first Monday of the month, check your accounts. If you have an old debt, call the collector to resolve it, then draft your LOE. I once saw a caterer with a 680 credit score turn a maybe into a yes by showing that yes, in the past, they missed payments. 12 years later that no longer happened. 

2. Capacity: Show you can afford to pay the loan back.
Calculate your Debt-to-Income (DTI) ratio. Your monthly profit should be at least 1.25x your new loan payment. To do this, open your Statement of Cash Flows. If your profit is $3,000 and the loan is $800, you have a $2,200 “Cash Cushion.” If you can’t show a cushion, you’re asking the lender to gamble on your survival. (Surprise! Lenders don’t gamble.)

3. Capital: Show You have “Skin in the Game”.
Create a Personal Net Worth Statement. List your startup cash, equipment, and “retained earnings” (profits you kept in the business). Save your receipts for every piece of equipment you buy. Update your Balance Sheet quarterly to show your growing equity. If a business shows $40,000+ already invested, it shows that they have a lot on the line, and the lender knows they’re in it for the long run.

4. Collateral: Show that there’s something to recoup if you fail.
Collateral is the lender’s safety net. List your business assets (trucks, equipment, inventory) and their resale value. Keep an Asset Log in a new Doc. Update the “Market Value” once a year by checking sites like Facebook Marketplace. [Real talk: If you’re asking for $25,000 but show $73,000 in assets, you’ve covered the lender 2.9x over. Plot twist: You just became a safe bet!]

5. Conditions: Show that there’s a good reason to take out a loan NOW.
Ask yourself, what’s the triggering event that makes you need a loan right now, and how will this make the business better off? Write it down. Saying something like “I need money to grow” is less persuasive than saying, “I secured a contract for the summer season that will increase revenue by 40%, and this $25,000 allows me to buy a second food truck that makes that possible.”

The first time you do these things, it can be overwhelming. If you dedicate one scheduled day per month to quality time with your finances, however, it will get easier, and you will start to see how you can make more money. And importantly, you will be less stressed.

The lender’s “yes” is not a mystery; it’s a checklist—and now you own the pen.

With love and a clean balance sheet,
Siobhan