Financial Wellness Month: The 5 Cs of Credit

Posted January 5, 2023 | By: Jacquelyn Kasbergen

January is Financial Wellness Month, and the beginning of a new year is the perfect time to check to see if your finances are on the right track or if it is time to hit the reset button. A big part of creating financial stability and wellness depends on regularly revisiting your financial goals and making sure you’re on a path to achieve them, including thoughtful consideration as to how you’re leveraging your credit. Having good credit can make a difference in your financial picture, helping you access the best rates, the most flexible payment options, and the most advantageous terms.

Growers already have a lot to consider when it comes to finances, but focusing on the variables that lenders use to evaluate credit worthiness – also known as the “5 Cs of Credit” – will help you be proactive in managing your credit and establishing overall financial wellness or maintaining it.

The 5 Cs are: Character, Capacity, Capital, Conditions and Collateral. These Cs are the things that credit providers typically look at when making credit decisions.


To determine your character, many lenders look at credit history and your credit score. They want to know that you make payments on time and that you have a plan to pay your bills. Lenders want to know that you have a system in place to repay the loan and that you’ll follow the loan agreement. Generally, they want to know you will make every attempt to honor your payment obligations.

For newer borrowers who may still be building their credit history, lenders can assess character through a conversation. You can achieve this by sitting down with your lender, discussing your business plan, being transparent and talking to them about your anticipated cash flow and repayment strategy. If you can demonstrate you have a reasonable business plan in place, it will help the lender make decisions despite limited credit history.

Character can also come into play in cases where borrowers are experiencing financial hardship and may be struggling to pay their bills on time. If you reach out to your lender proactively and keep them informed and updated, that communication can show good character. Instead of avoiding calls from your lender, be transparent and honest about where you are and work out a repayment plan.


Lenders look at capacity to determine if you’re able to pay back a loan. Debt-to-income ratio is an important measure for growers to manage. Lenders want to know that you can make payments even with the other payments you already have and that you won’t be overextended with another payment. There are ways to increase your credit capacity, but those come with pros and cons. You might want to pay down debt to lower your debt load and increase your capacity. Adding another income stream like a second job or income from a family member could help increase your capacity. Lenders will consider all forms of income, both from personal sources and from your business, in assessing your capacity, or your ability to repay your debts.


Lenders look at your capital to better understand how invested you are in your own operation’s success. The expression “having skin in the game” comes to mind. A lender will look at investments you’ve already made in your business such as land, equipment and inventory. If you have no skin in the game, then you have nothing to lose if your operation goes belly up. This is why lenders look at your capital investments - because they know a lot might be at stake for you if you can’t repay your obligations. Depending on what you are purchasing, down payments would also be considered under capital. For example, if you’re purchasing a tractor and can make a sizable down payment, lenders might view this as a credit positive.


Conditions include the specific terms of the loan as well as any economic conditions that might impact the financial stability of a borrower. Lenders also evaluate the purpose of the loan and what the borrower is financing as part of the conditions. For example, are real estate values going up or down? What are current marketing trends for the type of crops you grow? Some borrowers might have more stringent conditions associated with their loans. For example, some lenders might charge a higher interest rate for less established operations or riskier enterprises. If you don’t like the conditions being presented to you, you have options such as exploring other loan options or seeking help from a mentor or finance expert who can help you better understand your options.


Collateral refers to an asset a borrower uses to get a secured loan. For example, a car is the collateral for a car loan, a home is the collateral for a home mortgage. Not all lenders require that you provide collateral as security, so if given the choice, it is important to ask whether providing security has any effect on the interest rate. And it is also important to consider any concerns that you may have in granting a security interest to a lender. For example, by providing collateral on property, could that impact the ease at which you resell that property?  What happens if you can’t repay and you have to offer up the collateral to your lender, can you continue to operate without it?

In summary, this article highlights the importance of financial wellness and the role of credit in achieving it. By focusing on the 5 Cs of Credit, individuals can proactively manage their credit and work towards overall financial stability. Each of these variables plays a role in how lenders evaluate creditworthiness, and by understanding and managing them, you can work towards improving your access to credit and attaining better financial opportunities. If you are interested in other steps you can take to strengthen your credit profile, download our cash flow white paper found at

Jacquelyn Kasbergen

Jacquelyn Kasbergen is a territory sales manager for Nutrien Financial. She provides financing expertise to growers across California to increase their buying power and maximize every opportunity for success.


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