Five C's of credit

Five Cs of credit,

Definition of Five Cs of credit:

  1. Judgmental factors which (in theory) bankers use to evaluate the quality of a personal or small business loan application. First four of these are normally under the control of the applicant whereas the fifth is not: (1) Good reputation and track record (character) that indicates a willingness to meet ones obligations, (2) Stable and adequate capital base, (3) Capacity to generate cash flows adequate to cover debt-service, (4) More than adequate valuable assets for pledging as collateral, and (5) economic and other conditions conducive to the applicants plans. In practice, however, the order of the importance of these factors often is: collateral, capacity, capital, conditions, and character.

Meaning of Five Cs of credit & Five Cs of credit Definition