Working Capital Financing

Banks typically classify credit applicants into a series of risk classes. The interest rate applicable to a loan is established based on the risk class of the applicant.

The different risk classes that banks use to classify credit applicants are:

• Class 1
• Class 2
• Class 3
• Class 4
• Class 5
• Class 9
• Class 10

The interest rate on a loan is determined by the risk class of the applicant, as well as the type of loan and the length of the loan term.

Marketing considerations can sometimes override financial considerations when assigning risk classes. This is because banks may be willing to assign a lower risk class to a borrower in order to land their business.