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5 Cs Required for Business Loan Approval

Clix March 26, 2021

If you are business owner, you will need money at a certain point to increase operational capacity or to sustain in terms of an emergency. Ideally, the revenue generated by your business should provide working capital required for your day-to-day operations. However, during low-business periods, this revenue may be insufficient to meet your business needs. In such circumstances, a business loan can be an excellent source of external funding.

When you apply for a business loan, lenders look at certain factors while measuring your credit-worthiness. To call them the 5 Cs would not be wrong. If your lender is satisfied with these 5 protocols, you get a wider path towards a successful business loan approval. Here are the 5 Cs to get a fast and hassle-free business loan approval.


1.    Character

The first C is Character, which denotes the business entity for which you are applying the loan for. The lenders gauge a business’s character by checking its credit history and credit score. The credit history of a business reveals how it behaved financially in the past. By checking the borrower’s credit history, the lender can trace if it has any outstanding debts or if it was regular in paying its previous loans or not.

While checking your business’s Character, the lender also checks its vintage. They also check your business’ operating industry and the profit and loss ratio over the previous years. They sanction your business loan only after checking all these parameters.

2.    Capacity

Capacity of a business denotes a business’s capacity to repay the loan sanctioned. To gauge this Capacity, the lender checks your DTI (Debt-to-Income) ratio by summing up all the outstanding loans and calculating the monthly outgo. If it is over 40% of the business’s average monthly income, the lender may refuse your loan application. Lower the DTI, better are the chances of getting loan approval.

Besides DTI ratio, the lenders will also want to find out how you plan to repay the debt. Apart from examining your income and looking at your loan repayment plan, the lenders would also want to see how long you have been in the business.

3.    Capital

By checking your business capital, the lender gets an idea about how they will get their money back in case you fail to repay your loan. The lenders check how much money has been invested in the business. The higher the capacity, the safer it would be for the lender to grant you the loan.

4.    Conditions

The next C is the Conditions that include the current economic state, the protocols set by RBI, the present industry trends, and other applicable conditions. Many of these conditions are beyond the lender’s control. But the lender would want to see how the borrower will handle the situation in case any adverse event occurs in the future. For that, the lender would want to know how you plan to use your loan amount at present and in the future.

5.    Collateral

You will find both secured and unsecured business loans from different lenders. If you are going for a secured loan, you will have to provide an asset as collateral against the borrowed amount. It can be anything; from your commercial or residential property to your inventory, machinery, or future income. The maximum loan amount you can apply for depends on the value of the collateral. Therefore, the better option would be to opt for a collateral-free loan for which you don’t need to provide any collateral or guarantor. Clix Capital provides such collateral-free business loans from INR 5 to 50 lakhs.

Now that you have understood the 5 Cs that will help in a business loan approval, you can surely enhance your chances of getting an approval on the first try.

Here are a few things that can help you ensure you cover the 5 Cs

Bring Stability in Your Business: Every lender wants to ensure that the business is stable, growing steadily, and generating enough revenue. For this, they check your profitability and past accounts. If your income is stable and there are no ups and downs in your profit margin, then you have high chances of getting loan approval.

Improve Your Credit Rating: A high credit score of over 700 automatically increases your chances of getting loan approval. Defaulting repayments, irregular payments, and fraudulent activities can have huge impact on your score. So, make your payments regularly to maintain a high credit score. Here are a few simple tips to follow:

    • Avoid missing your credit card bill payments
    • Pay off all your EMIs and outstanding bills
    • Avoid making any late payments
    • Do not apply for a business loan from multiple lenders simultaneously
    • Do not apply for a new loan immediately after receiving rejection from a lender

Choose an Appropriate Lender: You can maximize your chances of getting loan approval by choosing a lender with simple eligibility conditions and minimal documentation requirements. The fewer their requirements are, the easier it would be for you to get your loan approved. Look at the repayment terms of the lender and find a convenient repayment plan. For instance, Clix Capital allows salaried individuals to repay their loan in 12 to 36 months, while self-employed professionals can choose a loan term from 12 to 48 months.

Looking for a collateral-free business loan? Clix Capital is here to help! Get a Clix Capital Business Loan at the most competitive rate of interest here

For any queries, find us on Facebook, Instagram, LinkedIn, Twitter, or WhatsApp

You can also reach out to us at or call us at 1800 200 9898

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