OCALA, FL (352today.com) – For business owners seeking financing, understanding how banks evaluate loan applications can take the uncertainty out of the process. Cogent Bank President Nick Blaser explains how character, capacity and capital play a central role in lending decisions – and how business owners can position themselves for success.
Lenders often rely on the “five C’s of credit” to guide decisions, and Character is the most commonly misunderstood. “Many business owners misinterpret Character, thinking it refers only to personality or likability,” Blaser said. “In banking, it’s about financial reliability and a proven history of meeting obligations. Trust is built not through charm, but through consistent, disciplined financial behavior.”
Alongside Character, Capacity – the ability of a business to generate enough cash flow to repay debt – is often the deciding factor in whether a loan is approved. “Without cash flow to repay debt, sometimes all the other C’s can’t make up for a lack of capacity.” Blaser said.
Capital, which represents the owner’s own investment in the business, also signals commitment and reassures lenders that the risk is being shared.
Blaser emphasized that preparation matters more than perfection when applying for a loan. He encourages business owners to start building relationships with their bankers before they need financing. “Even if not every metric is ideal, a well-supported application tells a compelling story and builds lender confidence.”
That preparation includes maintaining clean, current financial records, being transparent about weaknesses, demonstrating accountability and clearly showing how the loan will be used and repaid.
For those just starting out, Blaser recommends three habits that set a strong foundation: keeping accurate financial statements, separating personal and business finances and strengthening personal credit when business credit history is limited. These steps, he said, help demonstrate readiness and credibility.
At the same time, there are red flags that can quickly derail an application. Disorganized financials, unclear loan purposes, overleveraging or surprises discovered during due diligence are among the most common reasons banks deny loans. “Most of these issues can be avoided with preparation, transparency and by building a relationship with a banker who can help navigate challenges early on.” Blaser said.
By focusing on Character, Capacity and Capital, business owners can improve their chances of success and establish stronger partnerships with their lenders.
