1
1
By Nancy Dahlberg
Ray Juncosa, a consultant with the Florida SBDC at FIU Business, specializes in finance and helping small businesses access capital. Juncosa spent four decades as a banker, where he generated close to a billion dollars in loans and held senior management positions, and is an adjunct professor. He is also the leader of the SBDC Access to Capital program at the state level and involved at the national level too, so he is very well versed in loan and investment opportunities.
It's important to understand how lenders evaluate borrowers. The process of accessing capital is a quantitative analysis of your business, Juncosa says, "and you as small businesses need to learn to embrace your numbers." That means understanding your numbers, your margins, your breakeven so that you can best represent your company when you approach a lender.
"At the end of the day, you need to learn to speak the financial language," Juncosa says. That's a topic he helps small business clients with daily.
To begin looking at the process as a banker would, it is important to know your 5 C's of credit: Character, Capacity, Collateral, Condition and Capital, he said. Each one holds insight into how lenders are evaluating your business.
Character: This one goes to a small business owner's background experience and demonstrated management of credit — your credit history. Make sure you are always checking on your FICO score.
Capacity: This one focuses on your capability to repay loans and looks closely at factors like cash flow. The bank will go through certain levels of analysis of your personal and company cash flow, operational efficiency and profitability, Juncosa says.
Collateral: Collateral is a secondary source of repayment.
Condition: This evaluates the industry of the borrower's business, what barriers of entry the business may have, and what's going on externally that could impact the business.
Capital: That's your skin in the game – assets minus liabilities equals capital. Are you putting money back into the business?
What are some of Juncosa's recommendations for achieving bankability? No. 1 is maintaining a good credit score. Also, avoid too much inventory, he says. Understand performance margins, cash flow, debt management and financial statements.
