What are the 4 C's of banking?
Commercial lending institutions and financial credit underwriters utilize an expanded four-part evaluation framework known as the four C's of banking to assess loan applicants comprehensively. The first component is Character, evaluating the borrower's credit history, reputation, integrity, and past track record of fulfilling debt obligations responsibly. The second component is Capacity, analyzing cash flow stability, income sources, and debt-to-income ratios to verify the applicant's ability to service new loan repayments. The third component is Capital, examining liquid assets, net worth, and personal investments staked into the venture as a financial safety cushion. The fourth component is Collateral, assessing the tangible assets or property pledged as security to mitigate lender risk in case of default.
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