Credit Analysis

What are the 5 C’s of credit? How can lenders use them when assessing new loan mandates?

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This is a very interesting topic and it evolves through the years. The 5 C’s of credit in ship bank finance include Character, Capacity, Collateral, Capital, and Conditions. This was a concept first introduced by Professor Costas Grammenos in 1979. He then expanded it in 2002 to also include Company. All above factors have been tested through the years and provide a round framework for financial institutions to assess the creditworthiness of potential shipping borrowers. Fleet diversification is another important element because a diversified fleet provides reassurance to the banks that the cash flow generation capacity of a shipping company does not depend on a single shipping freight rates market.


Interesting insight @AlexP