Do You Know The 5 C’s of Credit?

Request More Information

  • This field is for validation purposes and should be left unchanged.

THE ESSENTIAL FIVE C’S

When you’re considering a major financial loan or asset based financing, it’s important that you take all of the mitigating factors into consideration. It’s every bit as important that you make a determination while assessing each of these criteria equally, as they should all equally influence your decision.

Request More Information

The FIVE C’s of Credit:

  • Character. The history of a borrower’s payment performance is an important consideration in determining if they will likely make payments on time and in full.

  • Conditions. The stability of both the borrower’s industry at present as well as the current economy overall should inform you as to whether they are a good candidate for a capital loan.

  • Capital. The debt-to-equity capital of the borrower, as well as their debt capacity, is an essential concern.

  • Collateral. What assets do the borrower have to give as collateral for their loan? Are they worthwhile? Are they sound?

  • Capacity. The borrower’s cash flow reflect their ability to repay you. What does that look like?

If you’re in a position to review a borrower in consideration for asset-based financing or a major capital loan, you owe it to yourself to check the borrower out thoroughly. Beyond the basics, the 5 C’s cover everything you need to consider when you’re determining whether a borrower meets your criteria. It’s as simple as:

  • Character
  • Conditions
  • Capital
  • Collateral
  • Capacity

Gambling with your hard-earned money — or your company’s — simply doesn’t make sense. It’s important to investigate a borrower fully and thoroughly before you come to an agreement about a capital loan or another asset-based financing decision. It’s crucial that they prove to you what they are willing to do in order to make you rest easy about their loan.

Don’t get caught in a bind with a borrower trying to pull the wool over your eyes. Insist on fully investigating the 5 C’s so that you can rest assured your loan is financing exactly what it’s supposed to. Good business begets good business, so put the 5 C’s into use in your business and lend smarter on every transaction.