The Five Cs of Commercial Credit: The Basic Elements of Credit and Lending (Recorded)

This recording reflects information, laws, and best practices as of the recording date. Requirements may have changed since this session was recorded — consult qualified counsel or a current source for guidance on today's requirements.

Course Description

The Five Cs of Commercial Credit is a framework used by lenders to assess the creditworthiness of businesses. By understanding the Five Cs of Commercial Credit, bankers can assess the risk associated with lending to a particular borrower and make informed lending decisions. This helps banks to manage their risk exposure and ensure that they are lending responsibly.

Moreover, by evaluating each of the Five Cs, bankers can provide valuable advice to borrowers on how to improve their creditworthiness. This can help borrowers to secure financing in the future and build a strong financial foundation for their business.

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 simple credit model is simple to understand and easy to use. The speaker explains how lenders assess each of these factors and provides practical tips for borrowers to improve their creditworthiness. Attend the session to see the big picture for credit analysis and underwriting.

Learning Objectives

• 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
• Learn how to employ the first four C's to analyze repayment ability
• Learn how to use the fifth C — character — to judge a borrower's willingness to repay

Areas Covered

• Introduction to the Five Cs of Commercial Credit
• Explanation of each of the Five Cs: Character, Capacity, Capital, Collateral, and Conditions
• 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 analysis in terms of relative liquidation values
• Capital 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

Who Will Benefit

• Small business owners
• Credit analysts
• Loan underwriters, loan review officers
• Commercial bankers, credit department managers
• Senior lenders, chief credit officers
• Credit managers, credit risk managers
• Risk managers, enterprise risk managers
• Senior lending officer
• Bank director, chief executive officer
• President, board chairman
• Financial professionals, such as accountants, bookkeepers, and financial advisors
• Entrepreneurs who are starting a new business and need financing