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As the economy begins to recover, banks are looking to expand their loan portfolios by lending to small and medium-sized businesses.

But this eagerness to lend doesn't necessarily mean everybody who wants a loan can get one. Banks are looking for customers that offer the least amount of risk.

"It's a lot like personal borrowing," said Alec Morley, senior vice-president of small-business banking at Toronto-Dominion Bank. "There's fairly well-established risk parameters."

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That means banks are looking for specific traits when a business owner walks through the door. As Mr. Morley explains, it's all about the Three C's:

Character: The first thing a bank scrutinizes is the person or company's repayment record. For an entrepreneur, a beacon score from the Canadian Credit Bureau is a key measure.

Collateral: Banks want a return on their loan, but not risk, since business financing is not the same as venture capital. Instead banks look for security on their loan. Unfortunately this makes it tough for startups or service companies that lack assets to get financing.

Cash flow: Can the business, and the individual behind it, make the repayments? Cash flow lets the bank know how much it should lend – and whether the company is taking on too much debt.

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Grant Robertson is an award-winning journalist who has been recognized for investigative journalism, sports writing and business reporting. More

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