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Business Loans » The Five C's of Credit

The Five C's of Credit

Money lenders are always looking for the best clients to lend their money to. But what sorts of things do they look for in a company? This is where the 5 C's of Credit comes in - character, capacity, capital, conditions, and collateral.

The character is the client's reputation and reliability. Are you trustworthy enough to repay the loan? Things associated with your character include your business experience and knowledge, references and education, and personal and/or business credit history.

Is your company able to repay the amount borrowed? Your company's cash flow will be reviewed, and how you intend to repay the loan is established. Payment history and records on other credit relations will be looked at and considered. These include both personal and commercial.


How much money have you invested into your business? The amount of your own money put into the company portrays a message of confidence and trust. It shows that you have taken the risk of funding the company, so the lender supplying the business loans knows it is safe to do the same.

How well is your business currently faring? What will the loan be used for? Is it for equipment, expansion, or just for financial security? Things such as the economy, competition, and customer base are noted.

If for some reason you cannot provide repayment, collateral will be a secondary source of repayment. Collateral can include things such as inventory, equipment, real estate, stocks, accounts receivable, etc. Usually a signed contract is needed as a guarantee.

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