The 5 C’s of Credit—Why Character Stands Out Now

The first four C’s—capacity, conditions, collateral, and character-evaluate a borrower’s ability to repay, but character forces the lender to examine closely the borrower’s willingness to repay, especially since the rise in fraud that accompanied the Great Recession and the more recent Pandemic Recession. Knowing your customer has become more challenging in an environment in which personal contact has been supplanted with remote, unobtrusive data gathering, e.g., credit reports, centralized underwriting, and approval, hunter-skinner processes, etc.

Areas Covered:-

• capacity measured by the ability to repay from cash flow
• conditions evaluated in terms of how borrowing needs change over the business cycle and what makes some industries more vulnerable to downturns than others
• collateral analyzed in terms of relative liquidation values
• capacity considered in terms of the borrower’s equity cushion and the degree of relative leverage possible
• character assessed in terms of willingness to repay as evidenced by payment history as well as tips for fraud prevention
  • demographics of fraudsters
  • fraud prevention measures rated in terms of effectiveness
  • recommendation for a fraud control program to offer borrowers

The intent is to provide bankers with a simple method for evaluating the creditworthiness of borrowers and emphasize character because of the rise in fraud losses in recent years.

Why You Should Attend:-

Bankers have relied on the 5 C’s of credit—capacity, conditions, collateral, capital, and character for many years, but what do these terms really mean, and how do lenders use them to determine whether a potential borrower is creditworthy? This credit model is simple to understand and easy to use.  Attend the session to C for yourselves