4Cs of Credit

Character
This refers to a candidate's business sense, reputation, credit history, and history of repaying
debt.
The history and experience of the business owner(s) and shareholders will be evaluated by
the lender. The main operations of the company and the environment they operate in,
including their duration in the industry, industry developments, and business location, are
also taken into account.
Capacity
In simple terms, this establishes a company's ability to pay off debt. The lender will analyse
numerous variables, including prior bank statements, other loans, your business strategy, and
whether the business trade is seasonal, to determine the borrower's capacity to repay the debt.
Existing businesses will have their prior Profit and Loss Statements examined. A lender may
also take into account any trends in the data from the most recent and prior fiscal years.
Collateral
A valuable commodity or asset known as collateral, such as money, real estate, or accounts
receivable, is generally used to secure a loan. The lender may take into account the security's
age, location, and characteristics. The lender may ask for specifics about the assets so they
can assess their present and future worth.
Unsecured loans do not require collateral, although it may increase your chances of approval
or lower your interest rates.
Capital
It is the additional security utilised if the borrower discovers they are unable to repay the
loan. Capital Lenders will consider the borrower's total financial status, including: assets and
liabilities net worth liquidity any deposit or borrower's contribution they are willing to make.
Assets such as cash, inventory, machinery, and previous investments in the company are all
considered capital.
Analysing the risk associated with the loan using the 4 Cs of Credit will help assess the
creditworthiness and potential risks involved in providing financing to More Vino. The
4 Cs of Credit are:
 Character: This is the borrower's standing, morals, and readiness to pay back debts.
The fact that Christian and David Stone are family friends and have put their own
money into the company suggests that Arthur Greenway has a favourable opinion of
them in this situation. To make sure the brothers have a history of appropriate
financial behaviour, Greenway would want to examine the brothers' track record in
managing debt and financial responsibilities.
 Capacity: Using the borrower's financial stability and cash flow, capacity assesses
their capacity to repay the loan. Greenway should carefully examine More Vino's
financial estimates and performance to determine whether the company will produce
 enough cash flow to pay back loans, especially in light of the anticipated rise in
expenses and the planned expansion. In order to evaluate the company's capacity for
loan servicing, Greenway might also want to look into its prior financial records.
 Capital: Examining the borrower's capital or equity position is known as capital.
Christian and David Stone are showing their dedication to the company by funding
the growth with their own money in this instance. In order to determine how the new
debt would affect the company's financial leverage, Greenway need evaluate More
Vino's present capital structure.
 Collateral: Assets that can be used to secure a loan are referred to as collateral. In
this case, Greenway and Moore might take into account whether there is enough
security for the TT$600,000 loan. To establish if More Vino has sufficient security for
the loan, they may wish to assess the value of the property, the inventory, and any
other assets the company owns.
Greenway can decide whether to offer More Vino extra finance after considering the 4 Cs of
Credit. He should think about the loan's possible hazards, the company's repayment capacity,
the effect of the expansion on its financial situation, and the degree of security offered to
support the loan. Greenway may opt to grant the requested investment if he finds that the
risks are controllable and the company has a good chance of succeeding. The Stone brothers
may be advised to look for alternate finance sources or examine other options for financing
the growth if he thinks the risks are excessive or that the company may have trouble paying
its debts.