BankerCollege

How the 5 C’s (capacity, conditions, capital, collateral, and character) are used to evaluate borrowers.

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?  Once you understand what and how, this simple credit model is simple and easy to use.  Attend the session to C the big picture for credit.

Areas to be discussed include:

1-capacity measured by ability to repay from cash flow with emphasis on global ash flow

2-conditions evaluated in terms of how borrowing needs change over the business cycle and what makes some industries more vulnerable to downturns than others, especially during this pandemic

3-collateral analyzed in terms of relative liquidation values based on liquidity, marketability, perishability, security, and other factors

4-capacity considered in terms of the borrower’s equity cushion and the degree of relative leverage possible

5-character assessed in terms of willingness to repay as evidenced by payment history as well as tips for fraud prevention

What can be learned from this session?

1. 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.  
2. Learn how to employ the first four C’s to analyze repayment ability
3. Learn how to use the fifth C—character—to judge a borrower’s willingness to repay

Who can benefit from attending this session?

• Credit Analysts
• Credit Managers
• Credit Risk Managers
• Risk Managers
• Enterprise Risk Managers
• Chief Credit Officers
• Senior Lenders
• Senior Lending Officer
• Bank Director
• Chief Executive Officer
• President
• Board Chairman