Business owner shaking hands with lending officer
Business owner shaking hands with lending officer

When applying for a commercial loan, character counts

A good reputation and clean financial history go a long way for businesses looking to secure a loan.

Like any individual, your business has a reputation established by past actions. This is your business’ character, and it can be hard to quantify. Despite that, character has a big impact on your business’ relationship with banks – for better or worse.

Think of character as a tree. A business with good character has a healthy network of roots to support it – things like strong credit, financial stability, and a history of repaying loans on time.

A single healthy root isn’t enough to nourish a tree, and neither is a network of weak ones. The same is true for character.

Sun shining through tree in vast green field

A strong personal connection can be as helpful as impressive numbers.

What exactly are banks looking for when assessing your business’ character?

A personal connection and honest communication between loan officers and business owners are vital to demonstrating good character. Too often, business owners view a relationship with their bank as purely transactional. But if you’re open, honest, and passionate about your business, odds are your bank’s representative will be too.

After establishing a solid relationship, it’s important to have your ducks in a row. Business owners with a history of responsible actions are more appealing when it comes to loan decisions because it decreases the level of risk for the bank. Things like a pattern of on-time loan repayment, balance sheets that line up, and a strong credit history do wonders for demonstrating good character.

How can you boost your business' character?

  • Start early, stay consistent: Establish healthy patterns of loan repayment, financial documentation, and positive interactions with other businesses right away – and keep them healthy as time goes on.
  • Build your relationships: Come into every interaction with bank representatives hoping to make a personal connection. Be open, honest, and knowledgeable about your business.
  • Tie up loose ends: If any area of your business is inconsistent or unorganized, clean it up before entering into a loan conversation. Start documenting your finances, line up your balance sheets, put together a coherent business plan, etc.
  • Avoid shortcuts: Don’t take shortcuts with your business. If you end up in a truly rough spot character-wise because of shortcuts, it can be hard to bounce back.

Remember: when evaluating you as a potential loan candidate, banks initially look more closely at personal character factors instead of raw numbers.


Strong character comes down to:

  • Consistent history of good business practices.
  • Professional interactions with others in your industry.
  • Open, honest relationships with your bank.
  • Not taking shortcuts or raising red flags.

Note: This is one of five blogs breaking down the Four Cs and a P of commercial credit worthiness – character, capital, capacity, collateral, and purpose.