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What are the Five C’s of Credit

The Five C’s of Credit is a method used by lenders to determine the creditworthiness of potential borrowers.

The system weighs five characteristics of the borrower, attempting to gauge the chance of default.

The Five C’s of Credit are: 

  1. Character
  2. Capacity
  3. Capital
  4. Collateral
  5. Conditions

Banks use rigorous policies and analyses when determining if and how much money to lend to clients. The methods banks use for lending analysis as the Five C’s of Credit. The Five C’s of Credit are character, capital, capacity, conditions, and collateral. Banks use the Five C’s for specific reasons respective to each category, but all are utilized to understand the risk of default on a loan.


A bank needs to have significant comfort with the character of its prospective borrowers. Indicators such as credit rating and borrowing history coupled with more qualitative factors such as honesty and integrity all support a case for a borrower’s willingness and ability to repay a loan.


A bank needs to understand the capital position of the prospective borrower’s business or personal wealth. More capital represents the borrower’s ability to withstand volatility. It also demonstrates the commitment an owner of a borrowing entity maintains. A strong capital position reassures a lender of the repayment capacity of a borrower.


Understanding the capacity to repay a loan is critical for a bank during the underwriting process. Strong cash flow from borrowers’ normal business activities demonstrates the capacity to repay debt and mitigates the probability of default.


A bank must also understand the broader market conditions affecting the industry, segment, market, and overall economy in which its borrowers engage in commerce. Strong industry growth or economic conditions support a business’s ability to generate cash and repay debt.


Lenders often take a lien on borrower collateral. If a borrower cannot repay debt with its cash flow, a lender must rely on the quality and resale ability of borrower collateral to repay the loan. A robust analysis of the collateral supporting a loan is an important step in granting a loan.

Don’t Judge A Book By Its Cover.

Just as you shouldn’t judge a book by its cover, at BitX Funding, we don’t believe in judging a small business’s creditworthiness by any metric. If we did, we might miss out on an opportunity to read a great book!

While some data points have specific restrictions, everything is always taken in context. For example, we understand that the standards for a “good book” vary across different genres. Just as a crime-thriller novel doesn’t need the same character development as a memoir, a software company doesn’t necessarily need the same asset coverage as a retail location. It’s also difficult to define a “good book” in an entirely objective manner. Different readers have different preferences, and some investors are willing to accept higher-risk options in exchange for larger potential yields.

But while we never recommend anyone buy a book based solely on the cover art, we use the business owner’s credit score to tell us if it’s worth taking the book off the shelf and reading the synopsis on the back. Therefore, we require a minimum 520 FICO score, 100K in revenue, and at least one year of operating history to qualify for a BitX Funding loan. For startups or businesses with less than 100K in revenue, we can look to FICO lending or credit card stacking.  With FICO lending, the minimum FICO score is 690 with no prior revenue and one day in business.

Let Us Help

BitX Funding is an online marketplace for small business loans where owners can fund a project through startup financing.

We specialize in connecting small business owners with lenders who will compete for your business. We believe small business owners drive the economy and are passionate about helping your company reach its full potential.

You can reach a loan specialist toll-free at 1-800-824-2407 or email [email protected] or apply online here, and we can guide you on which loan is the best fit for your business.




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