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GLOSSARYTERMS AS A CREDIT DESK USES THEM

5 Cs of credit

What are the 5 Cs of credit, and how does a credit desk actually use them?

ONE OF 80 TERMS · FREE · NO SIGNUP

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED

// THE SHORT ANSWER

The 5 Cs of credit are character, capacity, capital, collateral and conditions: the borrower's record and candour, its ability to repay from cash flow, how much of the business is the owners' own money, the security behind the loan, and the sector and economy it trades in. They are a coverage checklist that makes sure nothing is left out, not an order of reading. A credit desk covers all five but reads a file in a different sequence — the cash cycle and the source of repayment first, then the structure that protects the bank if those turn out wrong.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.

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