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| C1: Capacity | |
| Capacity measures the borrower's ability to pay, including the borrower's payment source, such as a job or profits from a business and amount of income relative to amount of debt. |
| C1: Capacity | |
| Capacity measures the borrower's ability to pay, including the borrower's payment source, such as a job or profits from a business and amount of income relative to amount of debt. | |
| You Chose: | |
GOOD
ADEQUATE
POOR |
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| The experts chose GOOD! |
| Judy's capacity to pay the loan is pretty tight. Total monthly income equals $5,000. Total monthly debt equals $3,268. The winter months are very slow for the bookstore. |
| C2: Collateral | |
| Collateral helps determine a bank's options if the loan is not paid. What asset can be turned over to the bank? What is its market value? Can it be sold easily? A valuable asset could include a house or a car. |
| C2: Collateral | |
| Collateral helps determine a bank's options if the loan is not paid. What asset can be turned over to the bank? What is its market value? Can it be sold easily? A valuable asset could include a house or a car. | |
| You Chose: | |
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GOOD
ADEQUATE
POOR |
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| The experts chose GOOD! |
| The loan to value is good at $75,000/$110,000 = 68%. However, in the event the bank would need to liquidate the assets to cover the loan, the assets of the bookstore are specialized and are not considered very marketable. This of course is the worst case scenario. |
| C3: Condition | |
| Condition refers to the borrower's circumstances. For example, if a furniture store owner was asking for a loan, the banker would be interested in how many chairs and sofas are expected to sell in the area over the next few years. |
| C3: Condition | |
| Condition refers to the borrower's circumstances. For example, if a furniture store owner was asking for a loan, the banker would be interested in how many chairs and sofas are expected to sell in the area over the next few years. | |
| You Chose: | |
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GOOD
ADEQUATE
POOR |
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| The experts chose GOOD! |
| The bookstore appears to be making money except during the slow winter months. It appears to be able to compensate for that time. |
| C4: Capital | |
| Capital consists of the applicant's assets (house, car, savings) minus liabilities (home mortgage, credit card balance). If an applicant has more liabilities relative to assets, the borrower could, on average, have difficulty repaying the loan if his or her regular source of income unexpectedly decreased. |
| C4: Capital | |
| Capital consists of the applicant's assets (house, car, savings) minus liabilities (home mortgage, credit card balance). If an applicant has more liabilities relative to assets, the borrower could, on average, have difficulty repaying the loan if his or her regular source of income unexpectedly decreased. | |
| You Chose: | |
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GOOD
ADEQUATE
POOR |
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| The experts chose GOOD! |
| Judy's net worth equals her assets of $200,000 minus her liabilities of $118,000. Net worth is $82,000. The repayment source for the loan is the income from the bookstore, which is not considered highly regular. However, Judy has a consistent payment history. |
| C5: Character | |
| Character measures the borrower's willingness to pay including the borrower's payment history, credit report, and information from other lenders. |
| C5: Character | |
| Character measures the borrower's willingness to pay including the borrower's payment history, credit report, and information from other lenders. | |
| You Chose: | |
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GOOD
ADEQUATE
POOR |
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| The experts chose GOOD! |
| Judy seems willing to work and keep the business running. Even though December and January were difficult months, Judy pulled through with her payments and got herself current again. |
| Classification | |
| Based on your analysis, how would you classify the loan? |
| Classification | |
| Based on your analysis, how would you classify the loan? | |
| You Chose: | |
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Pass (all 5 Cs)
Sub-Standard (3 to 4 Cs)
Doubtful (2 to 3 Cs)
Loss (0 to 1 C) |
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| The experts chose Pass (all 5 Cs)! |