5 Important Criteria Banks Evaluate When Lending a Commercial Loan


by Contributor

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(Jun. 17, 2019) — When it comes to businesses and loan requests, financial institutions and banks rely on various criteria. These principles follow an order of importance, and we will start with the most important.


In the business world, decisions are made usually based on trust level and not on any exact calculations. A good partnership between parties is often strengthened with the virtue of honesty. Most business ventures tend to hit a brick wall due to lack of trust, making working together difficult.

Similarly, banks and lenders apply the same rules when it comes to disbursing loans. The first important criterion when evaluating potential clients is the character of borrowers. A business with a good reputation and excellent administration will have an easier time transacting with banks and gaining access to credit. A company that possesses proper management in administration has a higher chance of acquiring a commercial loan than a company that has a good reputation but poor management.

The borrower’s character also integrates business partner references, ethical codes, years of experience, advertising, and history.


The second criterion is reimbursing capacity. Predominantly, this part is what decides whether a business is capable of handling a loan. This is determined by the capability of the company to generate profits and revenue. It is obtained from exploring the cash flow and statement of income, making it advisable to partner up with the likes of boostcredit101.com, with whom you can get assistance on boosting credit scores – even for new companies that have no rating.

If you happen to have a start-up business, lenders ask for the provision of cash flow projection and business plans. Nonetheless, the management’s education and experience level in start-up businesses play an essential role in the process.


Investment is an analysis element for a company’s financial structure. As financial institutions are evaluating the company in a long-term manner, this process takes longer for credit analysts.

Note that banks are comfortable with lending to businesses that are widely backed by the shareholders. Financial institutions will be comfortable risking their money where shareholders invest in more than 25% of the assets.


Conditions give the potential loaner information that could alter the ordinary company course and reshape the performance of the business.

Below are aspects that influence credit decisions, but that a company has no control over:

-Poor weather conditions

-Natural calamities


-Political choices

-Terror attacks


At number five, we are focusing on assurances the loaners have if the client is in default.

Collateral is taken into consideration mainly to minimize losses in case of default.

Usually, banks seek to secure themselves with the company’s assets, such as equipment, inventory, real estate, or company vehicles to recover the corresponding amount of money from the client’s unpaid balance.

In summary, the above are the five criteria used by banks when assessing the credit risk before lending commercial loans. It’s crucial that you maintain the correct image when dealing with financial institutions.

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