As you would expect in an industry that stresses lending, our contest
The contest announcement on Feb. 27 included my own list, but our
For instance, Joseph Dorovich of Cherry Hill, N.J., presented 18 solid
*You see thick dust on stored inventory while being given a tour.
*You overhear a company official telling a supplier a post-dated check
*The customer always wants to meet at your premises.
*The customer doesn't have any international business accounts or
*When you call the company, you get voice mail.
*The customers mailing address changes to a post office box number.
*During an audit, you learn that the company, which has no offices or
*While the company is negotiating a loan with you, it is making
And Kathleen Lewek, a banking consultant based in Culver City, Calif.,
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Here's a top 10 list that is particularly good, from Richard N. Latrenta
10) All attorneys are deal killers.
9) Make sure you obtain all prudent terms and conditions before closing
8) Be wary of a borrower who questions your bank's policy on overdrafts
7) When negotiating the rate on a loan, lenders should remember that
6) Never base your entire loan decision on the borrower's projections.
5) You can never have too much collateral.
4) Get the personal guarantee of the business owner(s) on every business
3) Every threat is an opportunity, and every opportunity is a threat.
2) What God giveth in interest, he taketh away in principal.
1) Cash is king.
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Another good list came in from Shepherd G. Pryor 4th of Chicago:
10) While you are adding all that complexity to your loan structure,
9) If you are being complimented because you "understand the borrower's
8) You can never look back proudly on the words "we can afford to add
7) Just because you have only one deal to look at doesn't mean you have
6) Remember that you have to live long enough to receive the principal.
5) As you sit around the bargaining table in a complex deal, make sure
4) No, your bonus will not be big enough to justify doing it.
3) A good numbers guy is like a biblical scholar; he can prove anything.
2) Entrepreneurs have no vagus nerve (the one that slows down some
1) Never think that a borrower can't fool you just because he is dumber
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But our winning entry comes from Kenneth Chin and Andrew L. Herz of
"Like lawyers everywhere, we could not resist saying in 20 items what
Their warnings:
20) Beware of the borrower who prides himself on breaking all the rules.
19) When the borrower focuses upon the consequences of a default rather
18) Avoid the loan whose repayment depends upon the "bigger fool" theory
17) When a new prospect says he was referred by one of your good
16) Recognize that entrepreneurs are a different breed - their optimism
15) Ask the obvious question: "How did you get to where you are today?"
14) Beware of borrowers who quote from "Winning Through Intimidation,"
13) Question a borrower's assumption that unit sales prices will
12) When an elementary school acquaintance resurfaces after 20 years as
11) If the customer's largest account is his father-in-law, ask more
10) Realize that a charming personality doesn't always translate into a
9) Make sure the borrower understands the effects of the compounding of
8) Recognize the true cost to your bank of the lavish entertainment
7) When checking out a reference, don't just accept a testimonial; know
6) If the choice of your bank by the potential customer seems illogical,
5) Watch out for pro forma financial statements covering a year that has
4) When a loan has a problem, don't expect it to get better if you
3) Underlying every unique, innovative loan structure is a unique,
2) Even if you have the toughest legal documents, don't rely on the
1) Beware the borrower who is disdainful of professionals; remember, you
Well, I never thought we would have two lawyers as co-presidents of
Mr. Nadler is a contributing editor of the American Banker and professor
