November 30, 1999 in ATDC News

The 5C’s of Credit

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Atlanta Woman magazine recently held a sold out event with a top quality panel moderated by venture partner Kathy Harris of Noro-Moseley Partners.  The panel was focused on entrepreneurship and was comprised of bankers, a bootstrapped entrepreneur and a venture-funded entrepreneur.

ATDC works mostly with companies in helping them seek angel or venture capital and typically does not get involved in debt.  Some of our companies are eligible for lines of credit and others for venture loans upon a successful series A or B.  Many are just too early.  But the rules of good angel and venture fundraising are similar to the rules of equity funding. 

Panelist Donna Kain of The Buckhead Community Bank advised the audience of mostly women business owners to come to a bank prepared.  It is surprising to see how many business owners are not prepared, particularly when asked about their financial statements.  Start a banking relationship early and show progress.  Existing customers have a much higher shot at financing than a new customer. 

So what are the 5 Rules of Credit?

  • Capacity  – your capacity to repay the loan
  • Collateral – typically startups will have to give personal guarantees at an early stage before significant assets or receivables are available to serve as collateral
  • Capital – how much capital you have invested as an indication of how committed you are to making the business succeed
  • Conditions – what is the purpose of the loan?
  • Character – the impressions of the loan officer on your character ; and as several panelists indicated, the passion you have for the business, as a indicator of your commitment.

Click here for more details on the 5C’s of Credit. In short, equity and debt investors both want the same thing.  A profitable opportunity and an entrepreneur who is committed and trustworthy.

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