Question

When assessing the creditworthiness of new entrepreneurs, lending institutions review the “Five C’s”. The ability of the entrepreneur to repay borrowed funds is known as:

Answer 1

Answer: Financial Capacity or credit capacity

Explanation:

The ability to repay refers to an individual's financial capacity to make good on a debt. By definition, credit capacity refers to how much credit you are able to handle. In deciding whether you qualify for a particular loan, your income is considered along with any other expenses and debts you may have.

Many lenders have a minimum credit score requirement before an applicant can be eligible for a new loan approval. Minimum credit score requirements will vary from lender to lender and from one loan product to the next. The general rule is the higher a borrower's credit scores, the higher the likelihood of receiving an approval. Lenders also regularly rely upon credit scores as a means for setting the rates and terms of loans. The result is often more attractive loan offers for borrowers who have good-to-excellent credit.