In regards to credit, what does capacity mean?

Finance Dec 19, 2020

Expert Solution

Prior to loaning a customer money, a lender must perform an evaluation. To evaluate a potential customer, lenders look at five items: character, capacity, capital, collateral and conditions.

}] {Section title=answer' !!!Answer and Explanation Capacity refers to the most debt that an individual or entity can presently undertake. This is a calculated amount based on a formula involving factors such as net income and existing debt.

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