The four Cs of credit: What are banks looking for?

Understanding principles smooths loan path for clients

The four Cs of credit: What are banks looking for?

Business development

The fours Cs of credit are a common set of principles banks and lenders consider when assessing business loan applications to help the lender understand your client’s business needs. The four Cs not only help lenders but can also help you when working with your client to apply for finance.

1. Character

Although it’s called character, the first principle has nothing to do with personality. This refers to your client’s business acumen, reputation, credit history and track record to repay debt.

A lender will assess the background of the business owner/s and shareholders, and their experience. Also considered are the primary activities of the business and the environment they operate within, including time in industry, industry trends and business location.

A few other things that a lender may look at include:

  • your client’s personal and business credit history
  • your client’s tax returns and financial history
  • whether your client has paid off previous loans
  • other factors such as job stability, previous businesses or any legal issues.


  • To check your client’s credit profile — visit MoneySmart for more resources
  • Check your client’s online reputation — does their website and social media account(s) accurately reflect their business?

2. Capacity

Put simply, this determines if a business has the means to repay debt. The lender will assess your client’s ability to repay the debt by reviewing several items including previous bank statements, other loans and understanding the strategy of where they plan on taking their business, and if the business trade is seasonal.

If the business is already established, previous profit and loss (P&L) statements will be reviewed. A lender may also consider any trend in the current and previous financial year data. Many start-ups have a lot of expenses in the first year, so the second year of trade may show a better picture.

It’s in everyone’s interest to ensure your client can comfortably afford to repay the loan without incurring hardship, so providing as much information as possible helps.


3. Collateral

Collateral is an item or asset of value that is typically used to secure the loan, such as cash, property, land or accounts receivable.  The lender may take into consideration the age, location and attributes of the security. Your client may be required to provide details of the assets so the lender can determine its current and future value.

Collateral is not required for an unsecured loan but it may improve your client’s chances of being approved or help reduce your interest rates.


  • Have your client create a balance sheet to identify their current assets
  • Have your client provide up-to-date valuations of their assets

4. Capital

Lenders will look at your client’s overall financial position including:

  • assets and liabilities
  • net worth
  • liquidity
  • any deposit or borrower’s contribution they are willing to make

Capital includes assets such as cash, equipment, machinery and investments already made into the business. The current value and potential future value of the capital will be considered should it need to be sold off in the event your client is unable to repay the loan.

Tip: Have your client complete a break-even calculation and cash flow forecast so they can make sure they can cover their repayments

When applying for a loan, it’s important for your clients to be informed, prepared and in good shape to borrow. Building a great relationship with an ANZ Business Banker can be a great support to help you navigate the complex world of business lending.

ANZ offers a range of finance solutions that may suit a variety of needs, so as soon as you have a client who is thinking of borrowing, start a conversation early with us to see how we can help.

Speak to your local ANZ Business Banker 

To discuss possible deals, speak to your local ANZ Business Banker, or for more practical tools, content and articles that can help your client run or grow their business visit the ANZ Financially Ready Business Hub 

This article is brought to you by ANZ

This is general information and ANZ is not providing advice or recommendations. Carefully consider what’s right for your business and your clients.

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