The 5 C’s of Credit – What Every Lender Looks At

Rita Kim June 16, 2014

I often get asked the question, “What are Lenders looking for when they lend you money?”

The simple answer: “The key to every lending decision rests on the RISK involved.”

As the risk increases, so will the terms and conditions of the loan. As the risk decreases, the lender can be more flexible.

Each lender or supplier of finance has a different appetite for lending and a different way of assessing loan requests. The foundation for every loan decision will always start with the “5 C’s of Credit “:


The character and integrity of the applicant is of utmost importance. If you were to lend money to someone, you would want to make sure that they had paid prior lenders back (and on time). This is why your credit history is reviewed on both sides: business and personal. How you treat your past suppliers of finance is an indication of how you will treat future suppliers of finance.


Requests for finance need to be for a specific purpose. Whatever the purpose is, you need to be able to provide some sort of security. For example, a business may be growing and need to purchase a building: Purpose: purchase of building; Collateral: building (and usually a few more items).


Conditions include interest rate, amortization, terms, down payment, etc. Conditions are determined by the purpose of the loan, the trending of the industry, economy and the risk of the business. As the risk increases, so do the conditions.


A business needs to show that they have sufficient cash flow to pay back the funds that they are requesting.


The business needs to show both capital inside the business AND the ability to further inject capital into the business.

This is a very quick snapshot of how lenders review financing requests. As a business lender, WeBC looks at these 5Cs as part of its due diligence. WeBC can offer loans up to $150,000. To find out more about our business loans, please join us for our weekly Business Loan Information Session (BLIS).

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