Basicly there are 4 criteria named 4 Cs to evaluate a credit application. They are character, capital, capacity and conditions.
Character: the credit applicant's character such as moral values, ethics, honesty. Past credit record and reliability of answers on the credit application form are used to understand character.
Capital: the wealth of credit applicant. Bank deposit, bond, real estate, painting, jewellery, copyright, etc. are accepted as capital. They should be liquid, convertible into cash whenever needed. Level of liquidity is very important. Most liquid capitals are cash, bank deposit, bond, stock and real estate in order.
Capacity: the income of credit applicant. Wage, salary, payroll, income statement, cash return on an investment, royalty, etc. are accepted as capacity. Both current and expected capacity are considered on a credit application.
Conditions: the environmental conditions such as general and regional economic conditions, employment conditions in especially a given industry or profession. They state risks on the credit.
Do you know other details on 4Cs and additional criteria of lenders?
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