One of the many tools of lending is the 5 C's of
credit, and the
initial evaluation of any loan application. It is used in conjunction
with an overall review of a business plan, and the purpose of the loan.
Credit Rating:
Have you demonstrated an ability to handle credit
in the past, responsibly? Have you ever applied for credit? Do you have
a
good credit history? In other words, do you always pay your debts on
time? If you do this would give you an R1 credit rating on your credit
bureau report.
Credit, depending on the above is rated on each credit account from R1
to R9.
Capacity:
Do you have the resources (funds,
income, revenue) to repay the debt, and/or the support of someone else to assist you with repaying the debt.
Commitment:
Are
you committed to repaying the, loan, and committed to the projects
success? Have you demonstrated a stable employment history, educational
commitment, and
long term residence? All of these indicate a good level of commitment
and stability.
Collateral:
What could you offer as
security for the loan? Is the collateral going to increase or decrease
in value? Can the collateral being offered be registered? Can the
security be sold,
moved, or relocated, with or without the knowledge of the lender? A
lender considers the ratio of the value of the collateral, against the
amount of the
loan.
Character:
The most important evaluation consideration! The lender will assess your character in combination with the
other C's. Now is your chance to show your professionalism and enthusiasm.
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