Q: Poll Question 9 only allows you to choose one from the five Cs of credit.
A: Poll Question 9 is as follows:
“Which of the following Five Cs of Credit would you consider the most important:
Even though more than one of the Five C’s is important, we asked that participants select only one as the MOST important.
Which “C” is the most important is a judgment call, but a strong argument can be made in favor of Character as the most important of the Five Cs. We use the definition of Character that we used in this series. Integrity is of paramount importance in defining Character, but so, too, are those other six personal qualities necessary for business success – desire, understanding the purpose of a business, vision, understanding one’s strengths and weaknesses, ability to learn from mistakes and experience, and tenacity. Character is critical in tough times or at any time, for that matter.
Sufficient Capacity is critical in supporting the first way out of a deal and sufficient Capital supports the second way out. Yet lacking Character, the borrower may opt to spend cash flow and cash resources on personal needs and whims in lieu of meeting company debt service. Or a company’s books and records may contain flaws and inaccuracies that falsely represent the company’s operations…and so on.
At the end of the day, it really does come back to Character. If we misread Character, we can be in for a tough time, regardless of what the numbers indicate.