Collateral, Credit, and Character: What Really Drives Lending Approvals

When it comes to getting approved for business funding, it’s easy to think the decision is purely about numbers. Revenue, credit score, time in business — plug the data into a system and get a yes or no.


But the truth is, lenders look at more than just your financials. Especially in today’s market, approval isn’t just about how much money you’re making — it’s about how you run your business.


Lenders want to know they’re putting capital into the hands of someone who knows what to do with it.


That’s where the Three C’s come in: Collateral, Credit, and Character.


Let’s break them down.



1. Collateral: What Do You Have to Back the Loan?


Collateral is any asset you can offer as security for the loan — and it’s still a key part of many approval decisions.


  • For traditional loans, collateral could be real estate, equipment, inventory, or even outstanding receivables.
  • For alternative or unsecured lending, it might not be required, but lenders still consider what assets you have in your business.


Why it matters: Collateral gives the lender a safety net. It shows you have skin in the game — and that you’re confident enough in your business to stand behind the loan.



2. Credit: What’s Your Financial Track Record?


This includes both personal and business credit. And even if you’re running a legit company, your personal credit still plays a role — especially for newer businesses or lower documentation funding options.


  • Lenders want to see that you pay your obligations on time.
  • They’re also looking at credit utilization, outstanding balances, and overall financial behavior.


Pro tip: A strong business credit profile can open more doors and better terms — but it needs to be built intentionally over time.



3. Character: Who Are You as a Borrower and Operator?


Here’s where most people miss the mark.


Lenders and investors aren’t just funding businesses — they’re funding people.


That means your reputation, experience, and how you show up in your business matter.


  • Are you organized?
  • Are you responsive and transparent?
  • Do you have a clear plan for how you’ll use the funds?
  • Have you handled previous credit responsibly?


All of this contributes to how fundable you are — and whether you’ll be seen as a smart bet or a risky one.


The Real Secret: It’s Not Just One C — It’s the Whole Picture


Think of the Three C’s like a triangle. Strength in one area can help balance out weakness in another. For example:


  • Strong collateral but limited credit? A lender might still say yes.
  • Weak collateral but great credit and a proven track record? Still workable.
  • Minimal assets and new credit history — but clear communication, professionalism, and a strong business model? A lender may be willing to take the risk.


Lending decisions are nuanced — and the more you understand the process, the better you can position yourself for success.



Final Thought



Approval doesn’t come down to just your numbers — it comes down to your full story.


So if you’re planning to seek funding soon, take a moment to evaluate all three C’s. Clean up your credit, document your assets, and show up like a business owner who knows exactly where they’re headed.


Because in the end, funding follows confidence — and lenders want to believe in you just as much as your business.

What Underwriters Look For in Business Loan Applications

By Lexington Capital • October 29, 2025
When you apply for business funding, your application goes through a critical stage—underwriting. This is where lenders evaluate risk and determine whether your business qualifies for financing, and under what terms. Understanding what underwriters look for can help you strengthen your application, avoid delays, and increase your approval odds.

Business Financing for Companies with Fluctuating Revenue Streams

By Lexington Capital • October 29, 2025
Not every business enjoys a steady stream of income. For many companies—especially those in seasonal industries, contracting, or project-based work—revenue can shift dramatically from month to month. These ups and downs are normal, but they can make managing cash flow, payroll, and operating expenses challenging. At Lexington Capital Holdings, we understand that fluctuating revenue doesn’t mean instability—it just means you need the right financial tools to stay balanced and grow confidently.

Financing Strategies for Rapidly Growing Startups

By Lexington Capital • October 29, 2025
The Challenge of Hyper-Growth For many startups, growth isn’t the problem—it’s managing it. Rapid scaling demands capital for hiring, marketing, technology, and operations. But too often, founders find themselves cash-strapped right when they need resources the most. Choosing the right financing strategy can be the difference between sustainable growth and burning out too soon.

How Business Owners Can Negotiate Better Terms with Lenders

By Lexington Capital • October 29, 2025
When it comes to business financing, the terms you secure are just as important as the funding itself. Lower interest rates, flexible repayment schedules, and higher approval amounts can mean the difference between simply surviving and setting your business up to thrive. The good news? Business owners often have more negotiating power than they realize. At Lexington Capital Holdings, we’ve seen firsthand how preparation and strategy can help secure stronger terms. Here’s how you can do the same:

Bridging the Gap: Funding While Awaiting Customer Payments

By Lexington Capital • October 29, 2025
For many businesses, waiting on customer payments can feel like standing still when you’re ready to move forward. Delayed invoices, extended payment terms, or slow collections create cash flow gaps that make it harder to cover expenses, pay employees, or seize new opportunities. The truth is—even successful, profitable companies face this challenge. The key isn’t avoiding it, but managing it strategically with the right funding solutions

How to Maximize ROI When Using Business Funding

By Lexington Capital • October 29, 2025
Securing business funding is a milestone—but the real impact comes from how you put that capital to work. Every dollar borrowed should fuel momentum, strengthen operations, and generate measurable returns. Unfortunately, too many businesses stop at “getting approved” and miss the chance to maximize their return on investment (ROI). At Lexington Capital Holdings, we believe funding isn’t just about access to capital—it’s about creating opportunity. Here’s how to ensure your financing delivers the highest ROI:

How to Use Financing to Strengthen Your Competitive Advantage

By Lexington Capital • October 29, 2025
In today’s fast-paced business environment, standing out from the competition requires more than just great products and services—it takes strategy, timing, and smart financial decisions. One of the most overlooked tools in building and maintaining a competitive advantage is business financing. When leveraged correctly, financing doesn’t just help you “get by”; it can actually position your business to outpace competitors and capture new opportunities.

Preparing Your Business for Unexpected Expenses

By Lexington Capital • October 29, 2025
In business, surprises aren’t a matter of if—they’re a matter of when. Whether it’s a sudden equipment breakdown, an unexpected dip in sales, or a market shift that requires quick adaptation, unforeseen expenses can test even the most successful companies. The difference between thriving and struggling often comes down to how well you’ve prepared.

Is Debt Always Bad? Understanding Good vs. Bad Debt for Businesses

By Lexington Capital • October 29, 2025
When most business owners hear the word debt, it sparks feelings of stress or risk. But here’s the truth—debt isn’t always a bad thing. In fact, when managed strategically, debt can become one of the most powerful tools to grow, stabilize, and scale your business. At Lexington Capital Holdings, we work with business owners every day who are navigating this very question: Is taking on debt the right move for me? Let’s break down the difference between “good” and “bad” debt so you can make informed financial decisions.

The Benefits of Partnering with a Dedicated Funding Advisor

By Lexington Capital • September 4, 2025
In today’s business world, financing options are everywhere—but choosing the right path can feel overwhelming. From traditional bank loans to alternative lending solutions, the fine print and fast-changing requirements often leave business owners spending more time deciphering funding terms than actually running their businesses. That’s where the value of a dedicated funding advisor truly shines. At Lexington Capital Holdings, we’ve seen firsthand how personalized guidance can transform the funding experience for business owners of all sizes. 
More Posts