Making Business Lending Decisions

Five Factors that We Use to Assist Us in Making Business Lending Decisions.

1. Cash Flow. South Carolina Federal Credit Union is a cash flow lender. That means we look at the cash flow of your business as the primary repayment source for the money we lend you. How do we compute cash flow? A company's cash flow is its net profit, plus its non-cash expenses — depreciation and amortization. Our rule of thumb is that for every $1 in total loan payments, your business must generate a minimum of $1.25 - $1.50 in cash flow.

2. Credit. South Carolina Federal uses a credit-reporting agency to look at your payment history with trade suppliers and other business obligations. We also look to see that your payments to other financial institutions are current.

3. Collateral. At South Carolina Federal, we make both secured and unsecured loans. With a secured loan, you pledge something that you own as collateral. It might be personal assets like real estate, certificates of deposits or stocks, or business assets like commercial real estate, equipment or accounts receivable.

4. Character. What kind of borrower will you be for the Credit Union? South Carolina Federal's best clue to your character is your personal credit history. We always check to see how well you have managed your personal debt in the past. What if you do not have personal credit history? Personal references, business experience and work history can sometimes substitute, but a strong personal credit history proves that you have the willingness and the discipline to repay past debts — and future obligations. We also look to see that your taxes are current and there are no tax liens.

5. Capacity. South Carolina Federal Credit Union wants to know how you would be able to repay your loan in case there was a sudden downturn in your business. Do you have the capacity to convert other assets to cash, either by selling them or borrowing against them? Your ability to do this could include real estate holdings, certificates of deposit, stocks and other sources of savings that can be liquidated quickly.