IBJNews

WOJTOWICZ: Character always counts—even in loan decisions

Back to TopCommentsE-mailPrintBookmark and Share
Jean Wojtowicz

Q: I recently was refused a loan for my small business, even though I met almost all the bank’s criteria: I had a strong business plan, good credit history and so forth. Despite this, the banker I spoke with said his bank was concerned that I had not been in my industry (though my company is successful) for a long time. I was totally surprised and upset. What can I do now?

A: During these difficult times, lenders are looking harder at intangibles. At the end of the day, it is cash flow that will repay the loan. The collateral and personal guaranty are nice, but cash flow is king. And you as the primary decision maker will determine how that cash flow is allocated. It is your basic moral character that will determine if you spend this money as intended (for loan payments and other essential items).

You might ask: What are the intangibles that will overcome—from the lender’s point of view—a good business plan and credit history?

A senior lender has told me that a borrower’s character is the most important consideration. Your banker apparently determined that your job history was an important character trait that did not match the bank’s criteria.

Lenders actually run into this type of situation fairly often. Many people start small businesses after gaining experience in a different line of work or moving from another part of the country or even other countries. It’s harder for a local banker to get a good handle on a business owner with a spotty job history or few references, so they look intensely at what they can learn about a person’s character.

I’ve talked with bankers, many of whom are now retired, who recall bygone days in rural and small town banks. Bankers knew their customers, their families and reputations. It was easier to judge character because people interacted frequently in business and social or community settings.

Now, bankers tell me that they probably don’t know a potential borrower until they walk in and ask for a loan. In other words, a banker is asked to place a bet on the borrowers most likely to pay back a loan, and they may not have much information to work with.

When you ask for a loan, they may actually Google your name and explore Facebook for clues on how to judge your character. This seems over-the-top, but these social media are tools that did not exist a decade or so ago and some bankers use them to gather information, especially if other data is lacking. Is there a chance a careless photo or some past history make you seem untrustworthy to handle a bank’s money?

It all boils down to the essentials: You get one opportunity to make a good first impression. When you are ready to approach another banker, make an appointment, but don’t lay on the business plan and its fancy graphics first.

Before your appointment, write several talking points to take with you—and commit them to memory. Be sure to highlight some of your past success and try to make the link that this pattern of achievement will continue. Know the details of your business and be ready to answer the banker’s questions. Offer the business plan after you and the lender get to know each other and you’ve answered relevant questions. Then the lender will have a better idea of your character.

Times are difficult right now, and bankers simply believe that borrowers with strong character will do everything possible to avoid defaulting, even under stressful conditions.

Character has always counted. Our fragmented society places a premium on a reputation for good character while making it hard to establish one and difficult for lenders to discern where to place their money.

_____

Wojtowicz is president of Cambridge Capital Management Corp.

 

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
 
Subscribe to IBJ
  1. I had read earlier this spring that Noodles & Co was going to open in the Fishers Marketplace (which is SR 37 and 131st St, not 141st St, just FYI). Any word on that? Also, do you happen to know what is being built in Carmel at Pennsylvania and Old Meridian? May just be an office building but I'm not sure.

  2. I'm sorry, but you are flat out wrong. There are few tracks in the world with the history of IMS and probably NO OTHER as widely known and recognized. I don't care what you think about the stat of Indy Car racing, these are pretty hard things to dispute.

  3. Also wondering if there is an update on the Brockway Pub-Danny Boy restaurant/taproom that was planned for the village as well?

  4. Why does the majority get to trample on the rights of the minority? You do realize that banning gay marriage does not rid the world of gay people, right? They are still going to be around and they are still going to continue to exist. The best way to get it all out of the spotlight? LEGALIZE IT! If gay marriage is legal, they will get to stop trying to push for it and you will get to stop seeing it all over the news. Why do Christians get to decide what is moral?? Why do you get to push your religion on others? How would legalizing gay marriage expose their lifestyle to your children? By the way, their lifestyle is going to continue whether gay marriage is legalized or not. It's been legal in Canada for quite a while now and they seem to be doing just fine. What about actual rules handed down by God? What about not working on Sundays? What about obeying your parents? What about adultery? These are in the 10 Commandments, the most important of God's rules. Yet they are all perfectly legal. What about divorce? Only God is allowed to dissolve a marriage so why don't you work hard to get divorce banned? Why do you get to pick and choose the parts of the Bible you care about?

  5. Look at the bright side. With the new Lowe's call center, that means 1000 jobs at $10 bucks an hour. IMS has to be drooling over all that disposable income. If those employees can save all their extra money after bills, in five years they can go to the race LIVE. Can you say attendance boost?

ADVERTISEMENT