Let’s examine the next of the 5 C’s of credit – Conditions.
CONDITIONS (ECONOMY) refers to the overall economy and how sensitive the borrower is to downturns.
What are the current economic conditions for: the country in general; the company’s industry; the local economy?
Bankers must always take a look at current economic conditions surrounding a business as well as issues surrounding its industry to determine key risk factors.
- It’s important, therefore, for the owner to make evident the ability to manage these risks to ensure the future viability of the business.
- Banks will examine the competitive landscape of the company, customer and supplier relationships, and other industry factors that may impede the company’s growth.
- Business owners should be prepared to describe the primary threats to the business and what measures are being taken to protect the company from these risks.