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5C’s of the credit is a term use in business to get funding from banks and other financial institutions for business purposes. Now these 5C, S also use in the real estate business, especially when someone buys homes, houses, land, shops and flats etc. in commercial or residential properties. The concept of 5C’S is very keen in USA, UK, Canada, Australia, Singapore, Hongkong and Dubai etc. where lenders take serious before offering funds to individuals and companies.







5C’S is the framework used by many traditional lenders to evaluate potential borrowers. In many countries, institutions take these steps very seriously. However, There are not strict guidelines in many countries. Even in online lenders use simple proprietary to determine a borrower’s application for credit by analyzing finances and other data, such as different social media accounts.

1)  CHARACTER; Refers to borrowers reputation for repaying debits

Character  of any individual is very important to descibe himself or herself in front of people or insitituon in every aspect of life.In business “Character” refers to borrowers reputation for repauying debits.Lenders think barrower’s gerneral trustworthiness,credibility and personality in the form of first “W” what is it?

Why? It matters becasue financial institutions want to lend to people who are responsible in deal and keep things to fulfill commitments.

H;How it’s assessed?
Lenders assessed borrowers charater from references,repuation and nteraction with lenders.

2)  CAPACITY; Measures borrower’s ability to repay a loan

Capacity or cash flow measure borrower’s ability to repay loans and lenders review borrower’s hoistory before decision.

Lenders use What,Why and How to complete this step.

“W”,What it is?  includes the ability to repay loans

“W”,Why it matters? A business must generate enough cash flow to repay the loan. Loans are a form of debt.

“H”,How it’s assessed: History it includes financial metrics and benchmarks (debt and liquidity ratios, cash flow statements), credit score, borrowing and repayment history.

“H”,How to master it? It metters in online and local banking differently.Online some lenders are very open to help finance immediate cash flow gaps.In local banks, pay down previous debt before you apply. Also, calculate your cash flow to understand your starting point before heading to the bank.

3 Capital; Consideration of money put towards investment

The level of capital usually considered by lenders toward investment.It includes amount of money and cridet in business.

“W”,What it is? The amount of money invested by the business owner or management team.

“W”,Why it matters?Becasue  Banks are more willing to lend to those who have invested some of their own money into the venture rather than loans. In most cases lenders are not willing to take on 100% of the financial risk.

“H”,How it’s assessed?  The amount of money the borrower or management team has invested in the business help to assessed.

“H”,How to master it? In many cases 70% of small-business owners use personal savings to start their business.


4. COLLATORAL;Secures the loan with the assurance of assets

The assurance of assets need to secure the loans.It includes the recurity,back up sources requires.

“W”,What it is? Assets that can be pledged as security.

“W”,Why it matters? Becasue collateral acts a backup source if the borrower cannot repay a loan.

“H”,How it’s assessed? Hard assets such as real estate and equipment; working capital, such as accounts receivable and inventory; and a borrower’s home that also can be counted as collateral.

“H”,How to master it? By picking the right business structure can help protect your personal assets from being used as collateral if you’re sued or if a lender is trying to collect. Making your company a legal entity will help you mitigate the risk.


5. CONDITIONS;Reffers how the buyer intends to use the money

Lenders in almost many cases put conditions to borrowers intends to use the money.

“W”,What it is? The business will use the loan and how that could be affected by economic or industry factors.

“W”,Why it matters?BEcasue  To ensure that loans are repaid, banks want to lend to businesses operating under favorable conditions. They want to identify risks and protect themselves accordingly.

“H”,How it’s assessed: A review of the competitive landscape, supplier and customer relationships, and macroeconomic and industry-specific issues to ensure that risks are identified and mitigated.

“H”,How to master it? You can not control the economy, but you can plan. Although it might seem counterintuitive, apply for a line of credit when your business is strong.


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