Start-Up: Virtually all creditors/investors define a “start-up business” as one that is younger than 3 full fiscal years old.

DSC Ratio = “Debt Service Coverage Ratio” = Ratio of Monthly Net Cash Flow to Monthly Loan Payment.

R/E Collateral = “Real Estate Collateral” is almost always residential real estate.
LTV = “Loan to Value Ratio” = Ratio of “total liens on your property” to “fair market value” of that property.

Credit History: A guess at what gets you a 680 FICO? At least 7 years of history: 3 credit cards + 1 car loan + 1 mortgage; no more than 6 late payments; no unsatisfied judgements; no outstanding tax liens; no collection actions; no payment settlements; no bankruptcies; no delinquent child support obligations.

Contribution: Your equity contribution; the amount of money you yourself have invested, or will invest, in your business. Generally, you must invest at least $1 for every $2 that you are asking a bank to lend to you. This translates to your contributing 33% to your business project. This level of owner contribution is also called a “debt/equity ratio of 2:1.” That is, for every dollar that you have invested in your business, the bank is lending two dollars to you. Very few banks are willing to lend more than two dollars for each owner’s equity dollar.

Character: The sum total of human attributes you bring to your business venture: common sense, emotional maturity, good physical health; related education; related business experience; a satisfactory knowledge of accounting and finance; the appearance of ethics and a sense of fair play; citizenship or permanent resident status; a personal life that does not conflict with your entrepreneurial life.

Competition: Lenders like to know that you have certain business strengths that will help you survive and prosper in the competitive marketplace. These strengths are called “competitive advantages.” You have a better chance of getting a loan if you (a) have a special technical skill that customers cannot purchase from your competitors, or (b) have a “book” of customers ready to patronize you exclusively as soon as you open your doors for business, or (c) have a patented product for which there is no satisfactory substitute, or (d) have a unique method of delivering services that competitors cannot duplicate for at least a couple of years. On the other hand, if you are going to be just one of several competitors offering about the same goods and services, and if the primary basis of your appeal to customers is going to be to offer lower prices, you will not satisfy the banks’ standards regarding this credit criterion. Competing for business on the basis of price alone usually leads to fierce price competition, which leads to all competitors suffering reduced profits, which usually leads to the smaller competitors struggling to pay their bills, including their bank loans. Your competitive strength is going to be an important consideration to any lender (i.e. big or small, private or public agency, SBA-related or otherwise) that you approach for a loan.