A working capital loan is availed when a business owner faces a shortage of funds. Working capital is the most basic requirement for the efficient operations of a business. Ideally, the funds for working capital are generated from the business. But sometimes insufficient revenue is generated when compared to the need. This situation leads to the businessman to avail a business loan.

The funding for the business can be availed from various sources, such as business loans, funding from investors, or equity funding. That said, if a loan for business is availed, the lenders follow a protocol to evaluate the loan application. Some loan lenders in India follow the protocol of 5 Cs of credit to assess the creditworthiness of the borrower. So, if a business owner can satisfy the lender with these 5Cs, the chances of getting the loan application approved increases.

Let’s take a look at the 5Cs of credit to get the working capital loan application approved.

Repayment Capacity

Repayment of the loan amount is undoubtedly the most crucial concern of every lender. The first C of credit is the repayment capacity of the business. For this, the lender checks the borrower’s debt-to-income ratio (DTI). It is calculated by adding all the outstanding loans and finding the total monthly income.

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Character – Previous Payment History

The other C of credit is the character of the business. This term denotes the previous loan payment history of the business. Also, the type of business or say the industry it is operating in. The lender determines the character by checking the CIBIL score of the business owner. The credit history reveals the past credit behaviour of the borrower. If the business person has an outstanding loan and is irregular in paying for it, this can be traced in the credit history.

What Are The Types Of Working Capital Loan?


If the business owner wants to avail a secured loan, collateral is an obvious requirement. The lender requires an asset as security to back the loan amount. Many business owners are not able to provide an asset to hypothecate. So, the best option for them turns an unsecured business loan. When availing an unsecured working capital loan, there is no need to provide any security. Thus, small business owners as well get access to a business loan in India.

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Capital is also an essential C of credit for getting the business loan application approved. The capital is essentially the amount that equals the worth of the business. The lender checks the capital of the business to comprehend if the business will be able to repay the loan. It also helps in determining the loan amount.


The last C of credit is the current condition of the country’s economy. It includes the RBI lending protocols, industry trends, etc. Some conditions are beyond the control of the borrower. But the lender still considers the condition to ascertain if the business owner would be able to face these conditions.

All the above mentioned 5 Cs impact the approval or disapproval of the loan application. So, while applying for a working capital loan, you too can look at the factors and accordingly apply for a business loan online.

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