Is a simplified method that lenders use to determine whether to advance a loan.  They are: Character – the applicant Capacity – the ability to repay the loan Capital – how much of your own money are you putting into the use of proceeds (e.g. a down payment for a house or a car) Collateral – the assets available to secure a loan – comfort if the cashflow dries up the lender may be able to recoup their money by selling these assets Conditions – the market (cost of debt to the lender) and structure of the loan (length of loan, covenants, interest rate)