Though it's the most important aspect of banking, I seldom write, speak, or teach about lending.

Why? I don't know much about it, and I feel that unless you actually lend money anything you say or write will be fiction.

I remember when J. Howard Laeri, vice chairman of Citibank, moaned: "It takes four years to train a jet pilot, and we take five years to train a section manager."

I would always comment in my classes that this is silly. I could train someone to lend money in 10 minutes. But my banker friends, while agreeing on the 10 minutes of lending instruction, would add, "It takes another four years to learn how to get it back."

So if I am teaching banking to students, I usually bring in guests who have lent money to small businesses.

This year was no exception. My panel of three small-business lenders offered ideas that should appeal to bankers who must try to turn down inappropriate loan requests without losing friends in the community.

Here are some of their ideas.

*Bankers should suggest that the loan applicant go to the right place from the start. For example, a bank can sometimes make a friend without putting money at risk by suggesting a certified public accountant who knows the types of lenders and understands their specialties.

*Very few borrowers know what's available to them from government economic development agencies and from small-business investment companies - both mainstream and those that stress minority lending.

*Even venture capitalists are not as expensive as may appear at first. For while many take a high percentage of a firm's equity to compensate for the funds provided, most do not want to retain their investment in those new ventures.

But while these hints are helpful, as a teacher of banking I have to have something to say about lending.

So in the spirit of David Letterman's top-10 lists, I have developed my own Top 10 Warnings on Lending, not necessarily in order of importance. Here goes:

10. Watch out when someone urges an action in which he himself incurs no risk.

9. Be wary when a potential borrower refuses to put his own assets behind the note. A proper response should be: "Maybe you know something about this credit that we don't?"

8. Be wary when someone does not negotiate with you over the rate you are charging. He is very likely to be feeling, "Why bother arguing? I'm not going to pay it back anyway."

7. Remember that, while correctly answering 90% of the questions on an exam justifies a grade of "A," it takes 99 out of 100 to break even in lending. Because the average bank earns 1% on assets, 99 loans have to be good to offset each bad one.

6. Make sure the business plan works. It can be 100 pages, or it can be written on a napkin, but it must provide cash flow.

5. A visit to the potential borrower's home is mandatory. Does he have two Mercedeses in the driveway? Is the house neat and organized? Try to determine whether he is a tyrant with his family. He is probably the same in his business as he is at home.

4. Make sure the would-be borrower is not planning to live off the bank's money while the business grows. If this means he must keep his old job while becoming an entrepreneur, and must work 16 hours a day, so be it.

3. Remember that, however large the borrower's company, size does not mean creditworthiness.

2. Remember the banker's lament: "When we started, I had the money, and he had the experience. Now he has the money, and I have had the experience."

1. In lending to any business, small or large, make sure your borrower has a dream.

Those are my top 10. Our next contest will be to judge yours.

Please send us your list - of any length - to take part in our new contest.

As usual, you will be helping fellow bankers and competing to win our prize of President for a Day at Schmidlap National Bank, with a certificate suitable for framing to prove it.

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